aio up for takeover

Asciano prime target

John Durie | July 14, 2009
Article from: The Australian
FOR the first time in its tumultuous two-year history, port and rail operator Asciano will be wide open to a takeover, with chief executive Mark Rowsthorn's stake in the company reduced to just under 4 per cent, or 112 million of the 2.84 billion shares on issue.

Three institutions - Ausbill, BT and Colonial - will own as much as, or more than, Rowsthorn, who started with a 10.9 per cent holding in Asciano.

Chairman Tim Poole mightn’t shout this from the rooftop, but the fact is, the massive increase in shares on issue, from 1.2 billion to 2.8 billion, and dilution in the boss’s hold on the company, is undeniably good news for him and all other shareholders, including Poole’s mum, given she recently topped up her stake.

At present prices, around $1.29 a share, the market capitalisation of the stock will more than double from $1.6 billion to $3.7 billion, but, of course, the reality is the slowing economy means it is no easier to make money now, with imports way down and hitting its port operations.

As much as Rowsthorn has been criticised throughout this transaction, the reality is he has actually acknowledged the problems and the perceptions and comes to the right conclusion at the end of the process.

Even rival bidders acknowledge the UBS bailout was the rational response from the company, given the conditions attached to the private-equity bids.

Rowsthorn sold $50 million worth of shares at $1.25 through a UBS bookbuild and has borrowed a further $34 million to allow him to take up all the rights due, but no more.

It is worth noting that every other shareholder had the right to match existing holdings plus bid for more, so his position was not any better than anyone else.

There were gripes from some, who for some reason thought he should be disadvantaged.

The cap and collar deal with UBS means he has effectively acquired a put option at $1.10 a share, limiting his downside, but his upside will be limited with a collar probably around the $1.80 to $2 a share level.

The exact triggers were not disclosed, but suffice it to say he will not be a forced seller and indeed Poole has instituted a rule that says insiders cannot take margin loans on their holding.

Full details of the record-setting UBS-Asciano deal will be released on Thursday.

http://www.theaustralian.news.com.au/business/story/0,28124,25780494-5013408,00.html