Just over a week ago, the Australian Competition and Consumer Commission (ACCC) indicated that it could block Brookfield Infrastructure Partners' proposed takeover of rail and port operator Asciano Ltd (ASX: AIO) as a result of concerns over vertical integration and concerns around the reduction of competition.
Brookfield has reportedly offered 'behavioural' undertakings, such as outsourcing operation of its trains to an independent company, and accepting tougher scrutiny from regulators. The ACCC has declared that these undertakings are unacceptable as they would be difficult to enforce.
Rival bidder Qube Holdings Ltd (ASX: QUB) already holds a blocking stake of 19.9% in Asciano, and has assembled a group of international bidders with the intention of dividing up Asciano's assets should its bid be successful. This is likely to be looked upon more favourably by the ACCC.
However, the plot thickens. After Brookfield's behavioural undertakings were rejected, the company declared it was looking at structural undertakings (which involve the selling off of assets) which may be acceptable to the ACCC.
Fairfax media reported this morning that Macquarie Group Ltd (ASX: MQG) could emerge as a co-bidder alongside Brookfield, given the former's track record of acquiring infrastructure assets to deliver attractive, long-term returns to shareholders.
Now what?
Brookfield's bid has the blessing of the Asciano board, which will prove important as shareholders may eventually have to decide which scheme is more palatable. As a result, Brookfield looks to have the advantage over Qube's competing proposal, if it can get the deal past the ACCC.
On the other hand, Qube has been quite bullish on its ability to seal the deal, and Brookfield has also indicated it would also be content to do nothing and hold its 19.9% stake for the long term. This could lead to a radically different or indeed, no outcome.
Meanwhile, Macquarie Group shareholders could be up for another capital raising if the company decides to take a shot at picking up Brookfield's rail assets.
Asciano shares are currently trading close to the price offered by Brookfield and Qube, and I would not consider buying them today as they are unlikely to deliver an attractive return in the near term.
