a 'dream outcome'

Dream outcome at AscianoFont Size: Decrease Increase Print Page: Print John Durie | June 15, 2009
Article from: The Australian

A BULLISH market will allow Asciano's Mark Rowsthorn to keep all assets and stay in control of the business.

UBS has brilliantly exploited the market’s renewed love affair with risk by underwriting the $2 billion Asciano rescue, which, at double the company’s market capitalisation, is a first for Australia, if not the world, in terms of the proportional size of the raising.

The issue, which will combine a placement with a rights issue, is obviously massively dilutive to existing shareholders and it begs the question - why didn’t Asciano attempt a similar exercise 12 months ago?

The answer may be as simple as the market wouldn’t accept that level of risk at that time, whereas now it is prepared to look past the initial gloom to the recovery ahead.

That explains why the company was then only looking at asset sales.

For UBS Australia, with a parent company in all sorts of financial trouble, it is one more bit of evidence of the strength of the local franchise and its leverage with head office.

Hopefully, the success of the deal will be reflected come bonus time.

UBS first approached Asciano last Wednesday and its deal effectively pre-empted the final due diligence that was programmed for the private equity bidders this week.

Clearly, the UBS deal was superior because it offered certainty and the chance to keep the company whole to let Asciano boss Mark Rowsthorn finally run the business.

The deal works because at $1.10 a share it is a big discount to the last closing price of $1.83 a share and even the theoretical rights price at $1.40 plus a share.

From an institutional shareholders’ perspective, a gun is effectively being held to their heads, with a decision needed to be made about taking up the rights and then participating in the placement.

But they will, on the basis that they can’t risk not accepting and then see the Asciano share price rise to threaten their own performance.

Existing shareholders like BT, Colonial and Capital can be expected to fully support the deal and even buy more than their share in the conditional placement.

The deal will be dilutive, but according to the company it was the least dilutive of all the bids.

Rowsthorn needs to decide whether he will stump up more money to maintain his 10.6 per cent shareholding in the company.

At the end of the day, the bullish tone of the market has delivered Rowsthorn his dream outcome - keeping all the assets together with himself in control.

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