Wealthy families have emerged as contenders for Aurizon’s East Coast Rail business, for which bids are due this week.
Aurizon inherited East Coast Rail through its acquisition of One Rail Australia for $2.35bn, which it finalised on July 29.
Aurizon, with a $6.9bn market value, has placed the East Coast Rail business on the market through Goldman Sachs to gain clearance from the Australian Competition & Consumer Commission for the One Rail transaction.
Earlier, European trader Glencore and Pacific National were considered logical acquirers, but neither is in the mix, sources say, with both facing problems with the competition watchdog over a deal.
The business is thought to be worth somewhere between $750m and $1bn.
If none of the family office suitors come up with the right price, the business will be demerged onto the ASX.
In some ways, the timing is ideal for the sale, given the surging profitability of coal.
Institutional investors and lenders do not like exposure to the commodity due to its impact on the environment amid the transition towards clean energy. But private family offices like the space and will receive something of a cash cow should they win the auction.
Their big challenge will be gaining financing at the right price, which is likely to be what their offers will be contingent on.
One Rail, which was owned by Macquarie Asset Management, has bulk haulage and freight assets in South Australia and the Northern Territory, together with the 2200km Tarcoola-Darwin railway line, and Aurizon plans to integrate it into its existing business.
East Coast Rail operates in NSW and Queensland.
For 2021, the unit generated $227m of revenue and $137m of underlying earnings.
It has $500m of bank debt and a BBB- rating.
When delivering its results last month, Aurizon said there were 10 potential acquirers that signed confidentiality agreements, and a decision on whether to proceed with a sale or a demerger would be made in the second quarter of the 2023 financial year.
The unit hauled close to 50 million tonnes during 2021 – the most in a decade.
Meanwhile, indicative bids for the $4.4bn CWP Renewables are due on Monday.
Partners Group is selling the Australian renewable energy company through Macquarie Capital.
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