Toll might pursue P&O instead
By Philip Hopkins
SMH November 3, 2005
Toll Holdings has flagged that it may buy the stevedoring assets of P&O Ports in Australia if it fails in its $4.6 billion bid for Patrick Corporation.
Toll managing director Paul Little disclosed this yesterday when discussing the reported interest by the government of Dubai, through Dubai Ports World, in buying P&O's worldwide operations.
The Danish shipping line AP Moeller, the biggest shipping operator in the world, has also been reported to be interested in P&O.
Mr Little said Toll would be keen to talk to both groups to see whether they wanted to keep P&O's Australian assets in their world portfolios. The Australian assets may not be central to their future growth plans.
"We have said Patrick's are the assets we would prefer to have. But if Patrick's assets are not available, we would look closely at P&O," he said.
Mr Little acknowledged that Toll had previously approached P&O to buy its Australian operations but "they were not keen".
"Under a sale process, we need to revise that now," he said. But the news about other parties' interest in P&O only became known on the weekend, so Toll had had no time to do any work on it.
Mr Little said the move on P&O confirmed the philosophy behind Toll's bid for Patrick: the rationalisation of the global logistics industry.
A takeover by Toll of Patrick would increase efficiency and be good for customers, particularly in and out of Asia, he said.
Mr Little's comments came as he issued Toll's supplementary bidder's statement in reply to Patrick's target's statement, and announced that the offer had been extended to December 2.
Mr Little said that by November 14, the Australian Competition and Consumer Commission would publish its phase one findings which would summarise the sensitive issues involved in a possible takeover.
These potentially were rail and coastal shipping. "We will address them as we go," he said.
Mr Little said the deficiencies in the Patrick target's statement reinforced the merits of Toll's takeover bid. These included:
■ Patrick has effectively endorsed the logic of Toll's bid by its plans to expand in freight forwarding and express freight but has no strategy to bring it about.
■ Despite two years of profit forecasts, Patrick has not provided any information on its current gearing and forecast cash flows.
■ Patrick's financial forecasts rely on the successful Pacific National joint venture continuing in its present form.
Mr Little said Patrick's port division was valued at 25 times 2005 earnings, which was 90 per cent above the average of recent port company transactions.
The multiple being offered for P&O was about 13 times earnings, while Toll's implied multiple was about 19. "The value we have placed on Patrick's ports assets means … we are paying a very full price," he said.
Mr Little reiterated that Toll had ruled out raising its price for Patrick. Toll's share price had been hit by concerns about the ACCC and the possible breaking-up of PN.
"Once Toll's share price is normalised, we will have a better view of the value of the Toll bid," he said.