Qube emerges as bidder in $1.2bn race for Geelong Port

The Port of Geelong is a major importer of oil.

Port and logistics services provider Qube has emerged as a bidder for the $1.2bn-plus sale of the Port of Geelong.

The $6.1bn listed group is taking on cashed up infrastructure investors to buy the asset in the final stages of the competition, DataRoom has revealed.

These include First Sentier, advised by Royal Bank of Canada, and Palisade Investment Partners with Stonepeak Infrastructure Partners, both advised by Gresham.

The port, which trades under the name GeelongPort, is understood to have a price tag worth about $1.2bn and is for sale through Barrenjoey Capital Partners and Macquarie Capital on behalf of owners Brookfield and State Super.

Final bids are due on December 10 and working for Qube is likely to be investment bank UBS.

Market analysts are sceptical as to whether Qube will emerge as the winner of the port given the price expectations of between 20 and 30 times its $60m of annual earnings before interest, tax, depreciation and amortisation.

ESG-aware investors in Qube that want to shy away from fossil fuels may not be upbeat about such a transaction.

 

The port handles crude oil and petroleum products from Viva Energy’s Geelong refinery at Corio Bay, along with export grain and woodchips, alumina imports and fertiliser.

The majority of the shipping is linked to the bulk liquid berth at Refinery Pier, where the port is based at Corio Bay in Victoria.

GeelongPort is the country’s sixth largest based on tonnage and handles over 600 vessel visits annually.

Qube’s Australian Amalgamated Terminals lost its contract for Webb Dock in Victoria where it carried out car stevedoring and has since talked about carrying out that activity from Geelong.

It is also worth remembering that it reaped a $1.65bn windfall this year from the sale of its warehouse and property unit at Sydney’s Moorebank to Logos.

It needs to retain $330m of that for capital spending and will pay about $270m of tax. Still, it has $800m of cash sitting on its balance sheet and is debt free.

A senior analyst that spoke to DataRoom said GeelongPort would mean a big spend on one asset for Qube that does not give the company a lot of scope beyond cars and bulk.

Qube is also facing pushback from the Australian Competition and Consumer Commission for its acquisition of the Newcastle Agri Terminal that handles bulk grain.

No doubt Qube’s board and management would have been closely monitoring the reaction of Aurizon shares to its $2.35bn acquisition of One Rail Australia, advised by Goldman Sachs.

Aurizon shares fell 6.2 per cent in response to the acquisition, which was said to have been brought about by what is considered to be a high price and the fact that Aurizon will now need to sell off or demerge the coal operations to appease the competition watchdog.

However, analysts believe that the deal is positive for Aurizon and the market overreacted.

One Rail consists of Hunter Valley and Queensland coal haulage operations and the South Australian and Northern Territory operations. The acquisition by Aurizon was first flagged by DataRoom on October 10.

A sales process is expected to be launched for the highly generative coal assets in the first quarter of next year and analysts expect that Aurizon will be hoping for a price of about 8 times their earnings.

Macquarie Infrastructure and Real Assets reaped $2.35bn for the sale of its One Rail Australia business, in a transaction where it was advised by Macquarie Capital and Credit Suisse.

Private family offices had been looking at the coal arm of the business earlier but were not prepared to meet MIRA’s price expectations.

The coal division generates about $140m of annual EBITDA so that could see it sell for about 8 times or just over $1bn.

Aurizon said on Friday One Rail booked EBITDA of $220m last financial year and the transaction.