Shares of leading rail and port operator, Asciano Ltd (ASX: AIO), are expected to jump higher today following the announcement of the company’s full year results this morning.
Despite generating $3.84 billion in revenues, representing a 4% fall year over year, Asciano achieved a 41% increase in net profit after tax, to $359.6 million, thanks to cost cutting and a reduction in project spending.
However, the big news from today’s announcement is the confirmation of the takeover offer from a consortium led by Brookfield Infrastructure Partners L.P.
In June, Brookfield, listed on both the New York and Toronto Stock Exchanges, launched a non-binding and conditional proposal for Asciano, valuing the company’s shares at $9.15 – equivalent to an enterprise value of $12 billion.
While the deal is subject to many conditions, including approval from the Foreign Investment Review Board (FIRB), Asciano shareholders are being offered $6.94 in cash and 0.387 Brookfield units (which are expected to be listed on the ASX) for every one Asciano share they currently hold.
The deal represents a 39% premium to the price of Asciano shares prior to the original offer.
In addition to the cash and scrip offer, and subject to the deal proceeding and ATO clearance, Asciano is expected to pay a fully franked dividend of 90 cents per share to investors.
Is there value in Asciano shares?
Currently trading at $8.11 per share, investors may be inclined to believe there is value in buying Asciano shares today. However, it’s important to bear in mind the conditions of the deal proceeding.
Indeed, the upside in the price may not outweigh the downside risk should the deal not go ahead.
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