Troops line up for Asciano...

Troops line up for Asciano

http://www.theaustralian.news.com.au/story/0,25197,25242089-5013408,00.html

THE battle for Asciano starts today as the private equity bidders assemble their troops from around the world to pitch their plans to the company in Melbourne.

First in line are TPG and GIP, which started the game last year with an indicative, highly conditional $4.40-a-share bid.

Asciano closed up 7.4 per cent at 80c a share on heavy turnover just as the company was continuing its talks with its banks.

There are a few deadlines to meet but by Anzac Day it should be clear in what form the company will exist and under whose control.

Clearly, the existing team would prefer to sell as little as possible to get the $1.5 billion needed to keep the bankers happy.

After all, come January next year it will start earning money on the $300 million spent to expand into the Queensland coal market, and by 2011 its Hunter Valley coal business will be expanded and -- market willing -- generating strong cash flow.

At this stage of the game, those prizes may be illusory for the management.

Next year, $2.8 billion of debt changes from being long-term to being a current liability. In August, the board under chairman Tim Poole must decide whether the business is a going concern.

This will require some faith in the banks' decision on rolling over debt.

There are 33 banks in the syndicate, 60 per cent of them based offshore. While supportive, banks, particularly those in Germany and other parts of Europe, face different pressures.

A supportive bank today may change is mind when it comes time to roll over the debt.

Citigroup has already sold some of its debt -- around $100 million worth to ANZ Bank, which, with some $450 million at risk, is the major lender in a domestic-based leadership group of the Big Four plus BNP and RBS.

In the next day or two, Asciano should disclose whether ANZ and Commonwealth have agreed to roll over some $258 million in working capital.

The auction is being run separately, with the so-called asset-only bidders doing due diligence online and the whole-of-company bidders strutting their stuff in the meeting with the company.

The latter is bigger than Texas when you consider TPG and GIP have teams from around the world involved, plus advisers from Credit Suisse, Macquarie and Goldman Sachs.

Asciano has gone around the market briefing people to let them know what's going on, with certified financial planner Peter McGregor doing the rounds of the brokers.

Deutsche and Citigroup are advising Sam Kaplan and Carlyle, who are bidding jointly, but co-investor Chris Corrigan played down his role in the venture in an interview published elsewhere yesterday.

KKR is also pitching for a whole-of-company bid, with the private equity pitches based on a recapitalisation of the company with private equity money as a cornerstone.

Asciano is keeping some distance between its bankers and the private equity teams to avoid a private auction in which private equity money would be traded for debt at a discount to let the banks off the hook early.

The businesses are obviously not without strategic value when you consider Asciano is the only integrated port and rail operator in the country.

The Future Fund is considering investing with another party in the ports business, which is an attractive asset with a growth profile of about 2.5 times GDP.

The fund has invested money in an infrastructure offshore, but whether it comes to the party in this case remains to be seen. Given its desire not to be a controlling investor, it depends in part on finding another partner.

Hopes of the Rudd Bank coming to the party are obviously dashed, given the political delays.

For now the game plan is set, with bids due on April 14 and a board decision due the following week.