MENU

Toll Group hands over Queensland rail rights to Asciano

Toll Group (ASX: TOL) is handing over railroad rights. The transport and logistics company announced today that it has agreed to sell its own North Queensland rail service operations to Asciano‘s (ASX: AIO) Pacific National Rail.

Expected to be completed by February 2014, the move has been hailed as a further strengthening of the two corporations’ relationship and a financial boost for Toll Group. “This agreement is a very positive transaction for Toll and all of our North Queensland customers,” said Toll Group Managing Director Brian Kruger in a statement. “The deal allows us to continue to provide Toll Intermodal’s customers with long-term access to quality rail infrastructure and significantly enhances the operational flexibility of our North Queensland business. It also reduces capital employed in this part of the business, which will result in an improvement in our return on invested capital.”

The 13-year haulage agreement allows Toll to continue to service its North Queensland customers, while handing over day-to-day operations to Asciano. The two companies have extended their current interstate rail haulage agreement to 2022, and Pacific National Rail will acquire five North Queensland terminals for around $70 million.

Foolish takeaway

Toll is Australia’s largest transport and logistics company – but bigger isn’t always better. This agreement allows Toll to continue to do what it has always done, without sucking up capital that could be used elsewhere. Asciano’s newly acquired assets were sold by Toll at book value, which leaves Toll with a clean cut and Asciano without worries of overinflated investments.

The new deal also takes care of a regulatory railblock. Starting next year, new minimum rail volume obligations on Toll in North Queensland might’ve proved troublesome for the company. With ownership handed over to Asciano, Toll Group no longer has to worry about hitting its regulatory quota.

Toll Group has managed to keep dividends rolling out to investors for years - and it's not the only one. Discover The Motley Fool's favourite dividend idea for 2014 in our brand-new, FREE research report, including a full investment analysis! Simply click here for your FREE copy of "The Motley Fool's Top Dividend Stock for 2014."

Motley Fool contributor Justin Loiseau has no position in any stocks mentioned in this article. You can follow him on Twitter @TMFJLo.

Two New Stock Picks Every Month!

Not to alarm you, but you’re about to miss a very important event! Chief Investment Advisor Scott Phillips and his team at Motley Fool Share Advisor are about to reveal their latest official stock recommendation. The premium “buy alert” will be unveiled to members and you can be among the first to act on the tip.

Don’t let this opportunity pass you by – this is your chance to get in early!

Simply enter your email now to find out how you can get instant access.

By clicking this button, you agree to our Terms of Service and Privacy Policy. We will use your email address only to keep you informed about updates to our website and about other products and services we think might interest you. You can unsubscribe from Take Stock at anytime. Please refer to our Financial Services Guide (FSG) for more information.