Aurizon (ASX:AZJ) - Managing Director & CEO, Andrew Harding
Managing Director & CEO, Andrew Harding
Source: Aurizon
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  • Aurizon (AZJ) welcomes a statement of issues published by the ACCC regarding its proposed acquisition of One Rail Australia
  • Currently, there are three main suppliers of coal haulage in NSW and Queensland — Pacific National, Aurizon and One Rail
  • Aurizon is one of the largest suppliers of coal haulage in Queensland and the second largest in NSW
  • The ACCC is considering whether the proposed acquisition would lessen competition in one or more regional markets
  • The commission is looking to have this resolved by July 14 and in the meantime invites submissions to its statement of issues and undertaking to voice their thoughts by June 23, 2022
  • Aurizon is down 1.19 per cent, trading at $4.15 at 10:01 am AEST.

The Australian Competition and Consumer Commission (ACCC) has outlined issues regarding a  potential lack of competition through Aurizon’s (AZJ) proposed acquisition of One Rail Australia.

Today the ACCC released a statement on the matter, which welcomed public feedback on whether these concerns would be addressed by Aurizon’s proposed divestment of One Rail’s east coast business.

The last press release from Aurizon’s team was released on May 25. Discussed in the release was the main conversation around the 10 new heavy-haul locomotives which were set to be sent to New South Wales and Western Australia.

Four of them have been sent out of the manufacturer’s Newcastle facility, and the other six are set to be commissioned in the coming months.

Currently, there are three main suppliers of coal haulage in NSW and Queensland — Pacific National, Aurizon and One Rail.

Aurizon is one of the largest suppliers of coal haulage in Queensland and the second largest in NSW.

One Rail is a well-established third supplier in NSW and a recently entered third competitor in Queensland that has had a significant impact.

“By reducing the number of competitors in the supply of coal haulage in New South Wales and Queensland from three to two and removing an important competitor to Pacific National and Aurizon, we have preliminary concerns that the proposed acquisition of One Rail by Aurizon would be likely to substantially lessen competition,” ACCC Chair Gina Cass-Gottlieb said.

The ACCC is also considering whether the proposed acquisition would substantially lessen competition in other markets and for more than just coal.

While the parties do not currently compete in the supply of these services, Aurizon has publicly stated its intention to continue to grow its non-coal bulk commodity rail haulage business.

“We’re also considering the impact of this proposed acquisition on potential future competition in the supply of non-coal bulk rail haulage,” Ms Cass-Gottlie added.

Aurizon has looked at establishing a divestment undertaking which in turn hopes to address the ACCC’s preliminary concerns.

This undertaking proposes to divest One Rail’s east coast business, which includes its coal haulage operations in NSW and Queensland. The undertaking would allow Aurizon to sell the business either by a trade sale or demerging it as a new separate ASX-listed entity.

The ACCC has released a draft of Aurizon’s proposed divestment undertaking for public consultation as part of its statement of issues.

With the work that has been done by Aurizon, the ACCC has still not formed a definitive view about the proposed undertaking to solve the problems stated above.

The ACCC is looking for feedback from public consultation to help resolve the matter and to reach a final decision.

Divestment remedies via demerger are not common and can present certain risks and complexities which need to be assessed.

An important issue is whether the financial arrangements that Aurizon has proposed for the new entity, including its proposed debt levels, would affect the proposed demerged business’s ability to become an effective competitor.

The ACCC is inviting submissions from interested parties to weigh in on their statement of issues and undertaking consultation by June 23, 2022.

A final decision is scheduled to be made on July 14, 2022. 

Aurizon is down 1.19 per cent, trading at $4.15 at 10:01 am AEST.

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