Rail operator Aurizon (ASX:AZJ) has unveiled a $2.35 billion deal to acquire One Rail Australia (ORA) from Macquarie Asset Management (ASX:MQG) using existing and new debt facilities.
ORA comprises bulk rail haulage and general freight assets in South Australia and the Northern Territory (the 2,200km Tarcoola-to-Darwin railway line) and a haulage business in NSW and Queensland.
Aurizon plans to divest ORA’s NSW and Qld business (East Coast Rail) through a demerger or a trade sale, whichever creates greater value. Until that time, the East Coast Rail business will be operated independently of Aurizon with a separate CEO and management team. This is to address potential competition concerns from regulators.
Aurizon said that One Rail Australia is a “strong, profitable business” with an estimated earnings before interest tax, depreciation and amortisation (EBITDA) of $220 million. This comprises Bulk EBITDA of $80 million and East Coast Rail EBITDA of $140 million.
Aurizon will retain and integrate the ORA bulk and general freight assets into the Aurizon business. These include the Tarcoola-to-Darwin rail infrastructure, South Australian regional infrastructure, five rail yards, 68 active locomotives, over 1000 active wagons and approximately 400 employees. Meanwhile, the purchase is subject to other conditions, including clearance from the Australian Competition and Consumer Commission.
“The One Rail acquisition is highly strategic and transformative for Aurizon. It is fully aligned with Aurizon’s strategy to grow our Bulk freight business into new markets and new geographies in Australia,” said CEO Andrew Harding.
“At our Investor Strategy Day in June, we detailed our aspiration to double our earnings in the Bulk business over the coming decade. The One Rail acquisition delivers a step change for Aurizon Bulk as a new entrant in the SA and NT region, and supports the ongoing growth of non-coal revenue in the Aurizon portfolio.”
“Upon completion of the transaction, with the integration of One Rail bulk and divestment of ECR, the Bulk share of Aurizon’s haulage revenue will represent around 40 per cent.”
Aurizon aims to complete the acquisition between January and April next year.
Shares in Aurizon (ASX:AZJ) are trading 5.1 per cent lower at $3.69.