AUSTRALIAN rail freight operator Aurizon has signed an agreement with Macquarie Infrastructure and Real Assets (Mira) to purchase One Rail Australia (ORA) for $A 2.35bn ($US 1.76bn).
ORA’s business includes bulk rail haulage and general freight assets in South Australia (SA) and the Northern Territory (NT), the 2200km Tarcoola - Darwin line, and a haulage business in New South Wales (NSW) and Queensland. Aurizon will divest ORA’s East Coast Rail (ECR) business in NSW and Queensland through a demerger or a trade sale, while merging ORA’s bulk and general freight assets into the Aurizon business including the Tarcoola - Darwin line, regional infrastructure in South Australia, five rail yards, 68 locomotives, more than 1000 wagons and approximately 400 employees.
ORA, previously known as Genesee & Wyoming Australia (GWA), was renamed One Rail Australia in February 2020 following confirmation that the acquisition of the remaining 51.1% stake in GWA by Mira and Dutch pension fund PGGM from Brookfield Infrastructure had been completed. At the time, Aurizon brought legal action over the sale of GWI’s Australian assets to Mira and PGGM. Mira and PGGM previously acquired the other 48.9% share of GWA in 2016.
The purchase of ORA by Aurizon is subject to several conditions, including clearance from the Australian Competition and Consumer Commission (ACCC). Aurizon will commit to divesting ECR following the completion of the ORA transaction, to address potential competition concerns from the ACCC arising from the transaction. Until then, ECR will be operated independently from the Aurizon Group with a separate CEO and management team.
The acquisition of ORA will be funded through a combination of Aurizon’s existing debt facilities and underwritten by new committed debt facilities. ORA has an aggregate estimated Ebitda of $A 220m for 2021.
“The One Rail acquisition is highly strategic and transformative for Aurizon,” says Aurizon managing director and CEO, Mr Andrew Harding. “It is fully aligned with Aurizon’s strategy to grow our Bulk freight business into new markets and new geographies in Australia. At our investor strategy day in June, we detailed our aspiration to double our earnings in the bulk business over the coming decade. The One Rail acquisition delivers a step change for Aurizon Bulk as a new entrant in the SA and NT region, and supports the ongoing growth of non-coal revenue in the Aurizon portfolio.
“Upon completion of the transaction, with the integration of One Rail bulk and divestment of ECR, the bulk share of Aurizon’s haulage revenue will represent around 40%.”
Aurizon aims to complete the ORA acquisition by April 2022, with this subject to regulatory approvals and other conditions. The divestment of ECR, also subject to regulatory approvals, is targeted for completion in 2022.