Asciano, owner of Patrick ports and Pacific National Rail, has confirmed it is holding talks over the potential sale of a stake in its container ports business that could be worth more than $1 billion.
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The confirmation comes after The Wall Street Journal reported that China Merchants, a state-owned Chinese corporation, was trying to buy a stake in Patrick.
Asciano recently signed a 60-day memorandum of understanding with Chinese Merchants to progress a deal, and was being advised by Goldman Sachs and JP Morgan, the report said.
Fairfax Media understands that Asciano is keen to retain a majority stake in Patrick, and that talks with China Merchants have been underway for some time. The sale of an equity stake would give Asciano, the only Australian-owned ports operator, cash to help make its ports business more efficient.
China Merchants, which recently teamed up with Hastings Funds Management to acquired the Port of Newcastle for $1.75 billion, is believed to want to benefit from the shipment of containers between Australia and China.
Asciano confirmed “it has been, and continues to be, in discussions with third parties in relation to a potential sale of a non-controlling interest in its Terminals & Logistics business division.”
“These discussions are preliminary and incomplete and no agreement has been reached with any parties at this stage.”
Asciano chief executive John Mullen has previously signalled that he is prepared to consider a sale of all of Patrick’s if the company received a high enough price.
The potential sale comes as competition increases in the Australian container ports industry, with Hong Kong’s Hutchison Port Holdings operating terminals in Sydney and Brisbane, and the Philippines-based International Container Terminal Services (ICTSI) to start operating a third terminal in Melbourne.
Asciano and DP World Australia, which is owned by Citi Infrastructure Investors and Dubai-based DP World, have to date controlled the Australian ports market.
Investors have previously pushed for Asciano to split its rail and ports business to create more value but have been happy with recent cost-cutting measures which have boosted profits and moves to make Patrick’s more efficient, such as automating its Port Botany terminal.
Asciano plans some $300 million in cost cuts by fiscal 2018.
Asciano’s shares, which are flat in the year to date, closed at $5.74 on Thursday.
