Alstom results

EU clears Alstom’s acquisition of Bombardier

The European Commission (EC) has approved the acquisition of Bombardier Transportation by Alstom, subject to commitments made by Alstom.

Since the acquisition was announced in February 2020, discussions have been ongoing to determine how the merger of the two major rail manufacturing companies would satisfy EU merger laws.

Last month, Alstom proposed a range of measures to get the deal over the line, unlike the previously deal to merge with Siemens, which fell foul of EU antitrust laws.

In a statement, the EC accepted Alstom’s proposal, noting that the two companies compete in areas such as very high speed, mainline and urban rollingstock, as well as mainline and urban signalling.

With the acquisition approved, Alstom will sell its Coradia Polyvalent range of mainline trains and the associated production facilities in Reichshoffen, France. Bombardier’s Talent 3 train series will also be sold, and part of the production facilities for these trains in Hennigsdorf, Germany.

To satisfy EC concerns in the area of high-speed rail, Alstom will divest Bombardier’s stake in the Zefiro V300 joint venture with Hitachi.

In the field of signalling, Alstom will allow competitors access to some onboard signalling units.

EC executive vice-president Margrethe Vestager said the acquisition would enable continued competition in the European rail market.

“Going forward, a stronger combined Alstom and Bombardier entity will emerge. At the same time, thanks to these remedies, the new company will also continue to be challenged in its core markets to the benefit of European customers and consumers.”

In a joint statement, both companies welcomed the decision of the EC.

“The divestitures will comply with all applicable social processes and consultations with employee representatives’ bodies,” the statement read.

“The transaction remains subject to further regulatory approvals in several other jurisdictions and customary closing conditions.”

The Australian Competition and Consumer Commission (ACCC) has an ongoing review of the merger, which commenced on May 11. August 20 is set as the provisional date for the announcement of the ACCC’s findings.

When the acquisition is complete, expected by the first half of 2021, Alstom will be the second-largest rail-equipment firm, behind Chinese manufacturer CRRC. The combined Alstom and Bombardier Transportation company would have revenues of €15.5 billion ($25.58bn) and would create the European rail champion, which was proposed when Alstom attempted to merge with Siemens.

Alstom results

Alstom proposes divestments to satisfy EU merger laws

Alstom has announced its proposed commitments to respond to potential European Commission concerns regarding its purchase of Bombardier Transportation.

The commitments are part of the process to satisfy the European Commission’s merger regulations.

The actions that Alstom has proposed include the divestment of the Alstom Coradia Polyvalent line and its production facilities at Reichshoffen, in France, as well as the divestment of the Bombardier TALENT 3 platform and its production facilities in Heningsdorf, Germany.

Alstom has also proposed the transfer of Bombardier Transportations contribution to the V300 ZEFIRO very high-speed train.

In signalling and train control, Alstom has proposed to provide access to interfaces and products on some of Bombardier Transportation’s signalling on-board units and train control management systems.

The European Commission is now reviewing these commitments and will make a decision whether to further investigate the procedure by July 16. Third parties are invited to submit observations.

In a statement, Bombardier confirmed its support of the commitments. Both companies confirmed that the acquisition process is on track to be completed in the first half of 2021.

The two companies confirmed that Alstom would acquire Bombardier Transportation in February, 2020, following weeks of rumours. The value of the exchange is between $9.4 and $10 billion.

In Australia, the Australian Competition and Consumer Commission (ACCC) has begun a review of the merger and has set a provisional date for the announcement of findings of August 20. The ACCC will apply the legal test of whether the merger is likely to have the effect of substantially lessening competition in a market.

ACCC seeks to take Acacia Ridge sale to High Court

The Australian Competition & Consumer Commission (ACCC) has sought leave to appeal to the High Court Pacific National’s purchase of Aurizon’s Acacia Ridge Terminal.

In May, the Full Federal Court, on appeal, found that the sale would not substantially lessen competition in the rail freight sector.

If the ACCC’s appeal is successful, it will be the first time that the High Court has heard a case with Australia’s merger laws.

Pacific National has criticised the ACCC’s pursual of the case, which had been heard and ruled upon twice at the Federal Court level.

“Pacific National was looking forward to completing the transaction and adding the Acacia Ridge Terminal to its network of efficient freight terminals, and this will once again be delayed while the ACCC seeks to further appeal what Pacific National considered was a comprehensive and correct decision by the Federal Court,” said a Pacific National spokesperson.

Aurizon has said in a statement that it would continue to operate the Acacia Ridge terminal and expected the leave application to be heard and decided before the end of 2020.

The ACCC has been pursuing the case as it sees the case as a test of Australia’s merger laws. In addition, the ACCC is attempting to seek a finding as to whether a court can accept an undertaking after finding a proposed acquisition is anti-competitive.

“We are seeking special leave to appeal to the High Court because it is vital for Australian businesses and consumers that competition laws are effective in protecting the competitive process,” said Simms.

Pacific National had offered to make an access undertaking which the Federal Court had initially accepted. On appeal the Full Federal Court found that the undertaking was not needed.

Simms said that the Full Federal Court’s decision did not recognise the impact of Pacific National’s purchase of the Acacia Ridge terminal.

“We believe that the Full Federal Court’s decision does not recognise the full impact of the proposed acquisition on competition in this vitally important industry.”

Federal Court dismisses ACCC appeal against sale of Acacia Ridge terminal

The Federal Court of Australia has upheld the acquisition of the Acacia Ridge intermodal terminal by Pacific National.

In a judgement delivered on May 6, the Full Court of the Federal Court dismissed an appeal by the Australian Competition and Consumer Commission (ACCC) against the sale of the terminal by Aurizon to Pacific National and upheld Pacific National’s cross appeal.

The appeal is the latest in a long-running legal process since the $205 million sale was announced in 2017. After the sale was announced, the ACCC blocked the sale and commenced legal action to prevent Pacific National from purchasing the terminal. A Federal Court challenge in July 2018 led to the Court dismissing the ACCC’s challenge. Subsequently, the ACCC appealed to the Full Court of the Federal Court.

The Federal Court has now found that the sale does not breach the Competition and Consumer Act. In addition, the court found that the undertaking that Pacific National agreed to, that would increase competition, was unneeded. In a statement, Pacific National welcomed the court’s decision.

“Pacific National welcomes today’s judgment and is looking forward to adding the Acacia Ridge Terminal (south of Brisbane) to its nationwide network of efficient rail freight depots, terminals and hubs.”

Aurizon also welcomed the court’s findings.

“Aurizon welcomes the certainty delivered by the Court today – for our business, our employees and our shareholders. It is almost three years since the sale of the Terminal was announced in August 2017 and two years since the ACCC initiated proceedings in the Federal Court in July 2018,” the company said in a statement.

ACCC chair Rod Simms said that the case would be looked at for what effect it has on mergers in Australia.

“We will now carefully consider the Full Court’s judgment. The ACCC will continue to consider what changes are needed to make Australia’s merger laws work in the way they need to, to safeguard the economy from highly concentrated markets.”

In the earlier Federal Court proceedings, Pacific National had unconditionally offered to not discriminate in providing access to other rail operators. The ACCC rejected this undertaking, however the court found in 2019 that the offered undertaking would have the effect of enabling competition. The ACCC had then appealed the decision based on the Court’s acceptance of the undertaking.

“Pacific National is actively working to ensure the many social, environmental and economic benefits of rail freight are realised throughout Australia’s transport supply chain, including the future Melbourne to Brisbane Inland Rail,” said Pacific National in a statement.

Ventia’s acquisition of Broadspectrum given green light

The Australian Competition and Consumer Commission (ACCC) has stated that it will not oppose Ventia’s acquisition of Broadspectrum.

The acquisition was first announced in late 2019. Ventia is a 50/50 partnership of CIMIC Group, which also owns CPB Contractors and UGL Limited, and funds management firm Apollo Global Management. Although operating largely in other sectors, Ventia has provided work on the Parramatta Light Rail. Ventia’s subsidiary, Visionstream, provides telecommunication services to the rail industry.

Broadspectrum, owned by Spanish multinational Ferrovial, provides rail services on the Sydney rail network, to Bluescope at Pork Kembla, on the Brisbane Airport rail Link, and provides maintenance services in South Australia. Broadspectrum will also install the Automatic Train Protection project on the Sydney Trains network.

The ACCC said that strong competition would remain in the sector if the purchase goes ahead.

“We looked at this proposed acquisition closely to ensure strong competition remains in the supply of infrastructure services to industries with a direct impact on consumer prices,” said ACCC commissioner Stephen Ridgeway.

“We contacted many customers of infrastructure services, and received consistent feedback that there is sufficient competition from alternative suppliers and that companies will continue to have a variety of options when contracting for infrastructure services.”

Aurizon’s revenue rises to $1.53bn

Aurizon Holdings Limited revenue has increased by $73.4 million or five per cent in the 2019/20 first-half earnings before interest and tax.

Australia’s largest rail-based transport business has released a half year report for the period ending 31 December 2019, detailing new growth in the company.

Aurizon stated in the report that the higher revenue is offset by the sale of the rail grinding business.

A spokeswoman from Aurizon said the large sale transaction for the rail grinding business was completed with Loram in October 2019 for $167m with $105m net gain on sale (not included in underlying earnings).

With revenue up five per cent to a total of $1.53 billion, the company’s underlying net profit rose 19 per cent to $268.9m.

The group credited the UT5 Undertaking as a factor that improved revenue. In December last year, Queensland Competition Authority (QCA) approved the agreement that governs access to its rail network. 

Aurizon executives stated that the company’s financial position and performance was partially affected by the closure and sale of Acacia Ridge Intermodal Terminal. 

Two years ago the Australian Competition and Consumer Commission (ACCC) opposed the sale of Acacia Ridge Intermodal Terminal and commenced proceedings against Aurizon and Pacific National in the Federal Court. Aurizon and the proposed new owner of the terminal, Pacific National, both filed notices of cross-appeal that will be heard by the full Federal Court later in February. 

Aurizon executives highlighted its full-year earning guidance to $930 million from $880 million. This figure was noted before assumed impacts from the Australian bushfires and the world health emergency, coronavirus.

The coronavirus has delayed the arrival of 66 rail wagons being made in the epicentre of the disease, Wuhan in China. 

A spokeswoman from Aurizon said an initial order of 66 wagons have already been delivered and the remaining 66 wagons are planned for delivery in February or March.

The first batch of 132 coal wagons have been completed by our supplier. The construction of the second tranche of 132 wagons has been delayed due to a slow down of production in China,” the spokeswoman said.

Operating costs increased $13.9m or 2 per cent, which were identified as due to to increased labour costs.

Aurizon’s network operates the 2,670km CQCN, the largest coal rail network in Australia. 

Aurizon executives stated in the 2019/20 half year report that 58 per cent of the company’s revenue, a total of $887.5m, was from transporting coal from mines in Queensland and NSW to customer ports.

Operational performance across the network  “remained strong” during the first half of the new financial year, according to Aurizon.

Total system availability improved from 81 per cent to 82.2 per cent, and cycle velocity improved 4 per cent.

Aurizon’s executives said the focus has been on the trial and implementation of schedule adherence in the Blackwater system in QLD.

Compared to the previous half, the network delivered an average reduction in turnaround time of 1.2 hours per service and both on-time arrival to mine and to port increased.

Aurizon’s executives said the network is now working with operators to improve the current scheduling process by realigning maintenance constraints to unlock capacity and optimising the weekly Intermediate Train Plan to avoid pathing contests between operators. The report stated that system throughput is expected to increase, in the third quarter of this year.

Pacific National, Aurizon critical of ACCC appeal in Acacia Ridge case

Aurizon and Pacific National have criticised the competition watchdog’s decision to extend its “expensive and reputationally damaging” campaign against the agreed sale of the Acacia Ridge intermodal terminal in Queensland.

The Australian Competition and Consumer Commission (ACCC) on June 27 said it would appeal the Federal Court’s rejection of its case against Aurizon selling Acacia Ridge to Pacific National.

Aurizon and Pacific National have been trying to finalise the deal since August 2017, when they announced PN would team up with Linfox to acquire Acacia Ridge and Aurizon’s Queensland Intermodal above rail business.

Initial opposition from the ACCC led to a split in that sale, with Aurizon selling Queensland Intermodal to Linfox, and PN to acquire Acacia Ridge.

An unsatisfied ACCC pressed on, however, taking its challenge of the Acacia Ridge sale to the Federal Court in July last year.

At that time the ACCC not only challenged the sale on competition grounds, but went so far as to make the pernicious accusation that PN and Aurizon had conspired to limit competition in the Australian rail market with the deal.

The ACCC dropped this component of its case before the court’s ruling, but was still unsuccessful with its competition claims, with the Federal Court approving the sale on May 15. The Court told the ACCC the competition issues it had raised were resolved with an unconditional access undertaking presented to the court by Pacific National.

Now the ACCC has announced it will again try to block the sale with an appeal of that Federal Court decision.

“This court action by the ACCC has been an expensive and reputationally damaging exercise,” a PN spokesperson told Rail Express on June 27.

Pacific National believes the Federal Court judgement created a pro-competitive outcome for freight in Australia by guaranteeing access for new entrants to get freight from road to rail. It’s important to remember the undertakings we’ve committed to did not previously exist at Acacia Ridge Terminal and any assertion that we would somehow subtly work to discriminate against other users is simply wrong.”

Aurizon responded to the news of the ACCC’s appeal through an ASX statement.

“The ACCC is asserting they believe the Court made an error in accepting an access undertaking in relation to use of the terminal,” Aurizon said. “Aurizon does not accept this assertion and is of the view this matter was fully considered by the Federal Court and the decision handed down in May 2019 was clear and comprehensive.”

If the appeal is granted, Aurizon said the Acacia Ridge sale will have to wait until the case is finalised by the Full Bench of the Federal Court, a process which could take several months.

The ACCC said its appeal would focus on the court’s involvement in the access undertaking itself.

“Among other things, we will argue that the court made an error by accepting the undertaking, and then using it as a relevant fact when determining whether there was likely to be a substantial lessening of competition,” ACCC chairman Rod Sims said.

“This appeal is crucial to Australia’s merger regime because acceptance of undertakings of this kind by the Court means that anti-competitive mergers could be approved, and this has the potential to damage the Australian economy.”