Aurizon shares slipped on Friday after the $7 billion provider of design, construction, maintenance and management services, announced it would acquire One Rail Australia (ORA) for $2.35 billion.
ORA comprises bulk rail haulage and general freight assets in South Australia and the Northern Territory; the 2,200km Tarcoola-to-Darwin railway line; and a haulage business in New South Wales and Queensland.
Subject to regulatory and conditions, including clearance from the ACCC, Aurizon will divest ORA’s NSW and Qld East Coast Rail business through a demerger or a trade sale, while it will retain and integrate the ORA bulk and general freight assets business. These include the Tarcoola-to-Darwin rail infrastructure, South Australian regional infrastructure, five rail yards, 68 active locomotives, over 1000 active wagons and approximately 400 employees.
In an announcement, Aurizon noted that One Rail Australia is a strong, profitable business with an aggregate estimated Earnings Before Interest Tax, Depreciation and Amortisation of $220 million for CY2021.
The acquisition is fully funded from a combination of Aurizon’s existing debt facilities and underwritten by new committed debt facilities.
Aurizon said it will commit to an enforceable undertaking with the ACCC to divest ECR following the completion of the ORA transaction. Until that time, ECR will be operated independently of the Aurizon Group with a separate CEO and management team. The ECR divestment commitment is to address potential competition concerns from the ACCC arising from the transaction.
Managing Director & CEO Andrew Harding said the transaction offered a unique opportunity to grow Aurizon’s business and create value for shareholders. “The One Rail acquisition is highly strategic and transformative for Aurizon. It is fully aligned with Aurizon’s strategy to grow our Bulk freight business into new markets and new geographies in Australia. 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.”