The Federal Court has dismissed the ACCC’s proceedings against rail companies Pacific National and Aurizon, which related to control of Acacia Ridge Terminal, a key asset in Australia’s intermodal rail network. Read more
Aurizon has successfully completed the sale of its Queensland intermodal business to international logistics company Linfox, ensuring the transition for customers and regional communities as well as job security for more than 300 Queensland employees.
The sale completed on 31 January and follows the ACCC’s concerns and following approval of the sale.
The Queensland intermodal business delivers for more than 300 customers across regional Queensland, including supermarket groceries, white goods for retailers, and beer and wine for country hotels and liquor stores.
The company says the sale provides certainty for Aurizon customers and local communities in regional Queensland, ensuring the supply of goods continues with Linfox as the new business owner.
It has also secured continued employment for more than 300 people across Queensland, mostly in regional centres. These employees, including train drivers and freight terminal operators, have ensured services continued for customers throughout the transition.
The ACCC has acknowledged Aurizon’s sale of its Queensland intermodal business to Linfox.
The ACCC has considered the Linfox proposal, and has decided that a public review of the transaction is not required, as it does not consider the acquisition by Linfox will give rise to a substantial lessening of competition.
“Linfox’s operations in Queensland are relatively limited, and the transaction will mean there will remain two intermodal rail line-haul providers in Queensland, which is a good outcome for rail competition and Queenslanders,” ACCC chairman Rod Sims said.
Aurizon had previously announced that it would shut the Queensland intermodal business if it couldn’t progress the earlier transaction proposal involving Pacific National.
Under the earlier transaction proposal, it planned to sell the rail component of the Queensland intermodal rail business to Pacific National, its only competitor in intermodal rail in Queensland.
“The ACCC did not consider that Aurizon’s shut-down plans were rational given there were other options,” Mr Sims said.
“The sale of the Queensland intermodal business demonstrates why the ACCC must always question claims that businesses will be shut if we don’t approve a merger.”
The ACCC litigation concerning the sale of Acacia Ridge Rail Terminal to Pacific National and Aurizon’s intermodal sale process is continuing.
The Federal Court has ordered that Aurizon must continue operating its Queensland intermodal business while the ACCC’s case against Pacific National and Aurizon is heard and determined.
The ACCC instituted proceedings in July this year against Pacific National and Aurizon, and their related entities, for allegedly reaching an understanding about Aurizon’s intermodal business that had the purpose and/or would be likely to have the effect of substantially lessening competition in the supply of intermodal and steel rail linehaul services.
In addition, the ACCC alleges that Pacific National’s proposed acquisition of Aurizon’s Queensland intermodal business and the Acacia Ridge Terminal, as well as an agreement for Pacific National to operate the interstate side of the Acacia Ridge Terminal, would each separately have the likely effect of substantially lessening competition.
Following today’s hearing, the ACCC has been granted injunctions against Aurizon which require it to continue to operate its Queensland intermodal business. The ACCC also sought orders for injunctions against Pacific National not to solicit employees and the top 10 customers of the business until the court proceedings are finalised, however those orders were not made.
“Given Aurizon’s previous announcements that it would close its Queensland intermodal business if the Pacific National acquisition was opposed by the ACCC, the ACCC sought an urgent interlocutory injunction to prevent Aurizon from closing its Queensland intermodal business until the ACCC’s proceedings involving that business are determined by the Court,” ACCC Chair Rod Sims said.
“It is part of the ACCC’s case that, at all times, Aurizon had alternatives to selling to Pacific National that would have been more competitive. The ACCC is aware of at least one alternative purchaser that is willing and able to acquire Aurizon’s entire remaining intermodal business.”
The final proceedings have been set down for a two week hearing starting on 19 November 2018.
“The ACCC will allege that it was more lucrative for Aurizon to agree to sell parts of the intermodal business to the closest competitor and close parts of that business than it was to sell the whole intermodal business to a new entrant,” Mr Sims said.
The ACCC has instituted proceedings in the Federal Court against Pacific National and Aurizon, and their related entities, for allegedly reaching an understanding in relation to Aurizon’s intermodal business that had the purpose and/or would be likely to have the effect of substantially lessening competition in the supply of intermodal and steel rail linehaul services.
“The ACCC alleges that in July 2017 Pacific National and Aurizon reached an understanding that would lead to Aurizon exiting its intermodal business through a combination of closure and transactions with Pacific National. The effect of the understanding was that Aurizon would stop competing with Pacific National to supply intermodal and steel rail linehaul services throughout Australia,” ACCC chairman Rod Sims said.
The ACCC also alleges that Pacific National’s proposed acquisition of Aurizon’s Queensland intermodal business and the Acacia Ridge Terminal, as well as an agreement for Pacific National to operate the interstate side of the Acacia Ridge Terminal, would separately each have the likely effect of substantially lessening competition.
The ACCC is seeking declarations, pecuniary penalties, orders restraining Pacific National from acquiring the Acacia Ridge Terminal and Aurizon’s Queensland intermodal business, and costs. The ACCC has also applied for an injunction to prevent Aurizon from closing its Queensland intermodal business while the case is being determined.
Aurizon intermodal sale process
During the first half of 2017, Aurizon engaged in a sales process for its intermodal business. That business consisted of several interconnected components, including the Acacia Ridge Terminal, and its interstate intermodal and Queensland intermodal businesses (which both depend on access to the Acacia Ridge Terminal).
The ACCC alleges that, in late July 2017, Pacific National and Aurizon reached an understanding and Aurizon terminated its sales process with other bidders.
The ACCC alleges that the understanding involved Pacific National obtaining control of Acacia Ridge Terminal, either by PN acquiring the terminal or, if that was prevented by the ACCC, by a long term contract appointing it as operator of the interstate side of the terminal, commencing 1 December 2018.
The ACCC also alleges that the understanding involved Pacific National becoming the exclusive bidder for Aurizon’s Queensland intermodal business, but that if Pacific National did not acquire that business, Aurizon would close it.
The ACCC alleges that Pacific National and Aurizon gave effect to this understanding by executing formal contracts including contracts for the sale of the Acacia Ridge Terminal and the operation of the Acacia Ridge Terminal (the Terminal Services Subcontract), and to negotiate exclusively for the sale/purchase of the Queensland intermodal business. Subsequently, Pacific National and Aurizon entered into an agreement for Pacific National to acquire the Queensland intermodal business.
In addition, Aurizon announced the closure of its interstate intermodal business on 14 August 2017. The business was closed by December 2017.
Earlier this year, Aurizon announced that it would close its Queensland intermodal business if the ACCC opposed the proposed acquisition by Pacific National.
The ACCC alleges that the closure of Aurizon’s interstate intermodal business and the planned closure of the Queensland intermodal business is a direct and expected consequence of the understanding reached with Pacific National.
The ACCC’s competition concerns
“Pacific National and Aurizon are the only providers of intermodal rail linehaul on the North Coast Line servicing northern Queensland. The ACCC alleges that the understanding, the proposed acquisitions by Pacific National and the agreement appointing Pacific National as operator of the Acacia Ridge Terminal would have the effect of creating a monopoly on that route,” Mr Sims said.
“Further, Pacific National and Aurizon were, at the time of the understanding, two of only three competitors on interstate routes. We consider that Aurizon’s closure of its interstate intermodal business substantially lessened competition on those interstate routes.
“At all times, Aurizon had alternatives to selling to Pacific National that would have been more competitive. The ACCC is aware of at least one alternative purchaser that is willing and able to acquire Aurizon’s entire remaining intermodal business,” Mr Sims said.
“However, the evidence makes it clear that it was more lucrative for Aurizon to agree to sell parts of its intermodal business to its closest competitor, and close other parts of that business, than it was to sell the whole intermodal business to a potential new entrant.”
“Given Aurizon’s announcement that it will close its Queensland intermodal business if the Pacific National acquisition is opposed by the ACCC, in circumstances where there is at least one alternative purchaser, the ACCC is seeking an interlocutory injunction to prevent Aurizon from closing this business until the matter is determined by the Court,” Mr Sims said.
During the ACCC’s review, Pacific National sought to address the ACCC’s concerns relating to its proposed acquisition of the Acacia Ridge Terminal by offering a court enforceable undertaking that it would not discriminate in providing access to the Acacia Ridge Terminal.
“The ACCC is of the view that the long term behavioural undertaking offered by Pacific National is not capable of addressing the ACCC’s concerns about the loss of competition resulting from the alleged understanding or Pacific National’s proposed acquisitions of Aurizon’s Queensland intermodal business and the Acacia Ridge Terminal,” Mr Sims said.
Further information is available at Pacific National Pty Ltd / Linfox – proposed acquisitions of Intermodal assets from Aurizon.
The ACCC has raised preliminary competition concerns about Pacific National’s proposed acquisitions of Aurizon’s Queensland intermodal freight haulage business and intermodal rail terminal at Acacia Ridge in Brisbane.
Currently, Pacific National and Aurizon are the only providers of intermodal rail linehaul services in Queensland and compete closely with each other.
“Aurizon’s decision to sell its Queensland intermodal operations and the Acacia Ridge Terminal to its closest competitor, while shutting down its remaining intermodal business, will fundamentally change this market. We are concerned about the impact on competition in the freight industry,” ACCC chairman Rod Sims said.
The ACCC has published a Statement of Issues outlining concerns about the reduction of intermodal rail linehaul providers from two to one in Queensland, raised barriers to entry for rail companies if Pacific National controls the Acacia Ridge terminal, and the reduction in options for freight-forwarders on most interstate rail routes from two to one.
Although freight services company SCT Logistics will remain on interstate rail routes, it is vertically integrated with freight forwarding and does not generally haul many containers for other freight forwarders.
The ACCC has received extensive feedback from interested parties who say there is no close alternative to rail for many types of freight, particularly to and from far north Queensland.
“We are concerned the proposed acquisitions would lead to increased prices and reduced service for freight hauled between Brisbane and Far North Queensland,” Mr Sims said.
The ACCC is also concerned about Pacific National’s proposal to acquire the Acacia Ridge Terminal.
“The Acacia Ridge Terminal is an important infrastructure asset, and would be a key component in the strategy of any potential supplier of intermodal rail freight that wants to compete with Pacific National.”
Pacific National has offered a section 87B undertaking that it would not discriminate in providing access to the Acacia Ridge Terminal if the acquisition went ahead.
The ACCC is consulting on the proposed undertaking as part of the Statement of Issues consultation.
“The ACCC’s preliminary view is that a section 87B undertaking won’t resolve the concerns arising from the dominant provider of intermodal rail linehaul services nationally also owning the Acacia Ridge Terminal,” Mr Sims said.
“We welcome feedback from all interested parties on the issues we have outlined.”
The ACCC is inviting further submissions from interested parties in response to the Statement of Issues by 3 April 2018. The ACCC’s final decision is expected to be announced on 24 May 2018.
The Statement of Issues and the s 87B undertaking are available on the public register here: Pacific National / Linfox – proposed acquisitions of Intermodal assets from Aurizon.
Pacific National is the largest provider of intermodal rail freight services in Australia. Currently, Pacific National and Aurizon are the only providers of intermodal rail freight services within Queensland. Aurizon previously also competed with Pacific National and SCT on interstate routes.
The interstate rail network is a standard gauge rail track, while the rail network north of Brisbane is narrow gauge and requires specific locomotives and wagons.
The Acacia Ridge Terminal has both a standard gauge terminal (supporting interstate transport), which was used by both Pacific National and Aurizon, and a narrow gauge terminal (supporting transport within Queensland) used only by Aurizon. Pacific National’s Queensland rail operations currently use a separate terminal at Tennyson, which is owned and operated by Pacific National.
Australian rail freight operator Aurizon is assessing a plan to by the Wiggins Island Coal Export Terminal (WICET) in Queensland, reports the Australian Financial Review (AFR).
The AFR adds that the rail operator had been looking to partner with Macquarie, with Aurizon acquiring the port’s terminal and investment banking group Macquarie getting the port’s biggest customers. After the recently sale of major Curragh coalmine to a US coal producer Coronado Coal, it is unclear whether Macquarie will still be interested.
“Aurizon […] continues to consider its proposal for WICET and in that content is still reviewing the announcement on the sale of Curragh mine,” a spokesperson said.
Australian rail freight operator Aurizon has announced that Marcelo Bastos has joined the Aurizon Board as a Non-Executive Director, effective 15 November.
Bastos has more than 30 years of experience globally in the mining industry, in major project development, operations, logistics and senior leadership.
Most recently, Bastos was Chief Operating Officer of MMG Limited, and previously he worked at BHP Billiton, where he served as President Nickel Americas, President Nickel West (based in Perth), and CEO and President of BHP Billiton Mitsubishi Alliance (based in Brisbane).
Marcelo is currently a Non-Executive Director of Iluka Resources Limited and an External Director (Non-Executive Independent) of Golder Associates.
Commenting on the appointment, Aurizon Chairman Tim Poole said, “I am delighted that Marcelo will be joining the Aurizon Board.
“Marcelo has extensive operational and project management experience in the resources sector globally. Marcelo has an excellent understanding of our business, our customers and our opportunities and will further diversify the skills and experience of the Aurizon Board.”
Container port operator DP World Australia has announced changes in leadership for its Fremantle operations and Continuous Improvement business unit.
Replacing Luke Westlake as Fremantle General Manager Operations will be Stefan Reynolds, effective 11 December 2017.
For the past nine months, Reynolds has led process improvement projects in Melbourne and nationally as Head of Continuous Improvement, Operations.
“With over 10 years’ operational experience in the container transport and logistics field, Stefan brings a high calibre of operational and change leadership experience to Fremantle,” said Max Kruse, Chief Operations Officer – Terminals, DP World Australia. “In his recent position as Manager of Capacity, Planning, Gate and Operations Projects with Ports of Auckland, Stefan worked closely with a large team as well as other departments, to continuously focus and strive for exceptional levels of performance and customer service.”
In Melbourne, Troy Sparkman will join the DPWA team as Head of Continuous Improvement, Operations, effective 30 October 2017.
According to Kruse, Sparkman has 28 years’ experience in the rail transport and logistics industry, and worked in most states and regional areas of Australia during that time.
“Troy has a significant understanding of supply chain and operational management,” Kruse added. “Having held general manager roles with Aurizon, most recently as the General Manager service delivery for the interstate intermodal business, and Regional Integration Manager responsible for operational optimisation and transformation of the Hunter Valley and West Moreton supply chains.”
Linfox has entered into a consortium with Pacific National to purchase the containerised freight haulage and end-to-end freight forwarding capability on Queensland’s northern freight line. The two companies are purchasing separate parts of the Aurizon rail assets.
Forming a consortium with Pacific National is the first step towards purchasing these strategically significant assets that are currently owned by Aurizon Queensland Intermodal.
This acquisition will enable Linfox to improve the scale and scope of the freight forwarding services it offers to national and large Australian freight forwarding customers, including those delivering freight to Northern Queensland.
If the Pacific National transaction is cleared by the ACCC, Linfox will acquire and use the rail haulage capacity supplied by Pacific National to supply intra-state and interstate freight forwarding services to customers in Queensland and Northern Queensland.
The acquisition will also include pick-up and delivery and warehousing services, but exclude standard gauge haulage to and from Acacia Ridge and hook-and-pull contracts for train services.
Pacific National has signed a binding agreement to buy the Aurizon Queensland Intermodal business as part of a consortium with Linfox.
This transaction includes the transfer of approximately 350 Aurizon employees, as well as assets, commercial and operational arrangements to the Linfox and Pacific National consortium.
The parties are aiming to finalise these transaction by the end of FY2018, both transactions are subject to:
- Approval by the Australian Competition & Consumer Commission
- Approval by the Foreign Investment & Review Board
Separately from Linfox, Pacific National has also signed a binding agreement with Aurizon to purchase the Acacia Ridge Intermodal Terminal in Brisbane.
This transaction includes the transfer of 30 Aurizon employees, as well as assets, commercial and operational arrangements.
The Acacia Ridge Terminal will supplement Pacific National’s national network of terminals and provides security for Pacific National’s interstate operations out of the terminal for the long term.