Sarah Thompson, Anthony Macdonald and Tim Boyd
May 19, 2021 – 9.33pm
Macquarie has offered to split its rail freight and coal transport business One Rail Australia in a bid to overcome negative investor sentiment towards the fossil fuel and record a $2 billion-plus payday.
Macquarie’s infrastructure investment arm, MIRA, and its bankers have proposed splitting One Rail Australia into separate coal and non-coal businesses, in early discussions with potential buyers.
One Rail Australia's business includes carrying coal in the Hunter Valley region of NSW for miner Glencore.
One Rail’s coal business would shift coal for major miner Glencore in NSW’s Hunter Valley and Queensland and be a $130 million a year business at the EBITDA line.
The non-coal business would own and operate the bulk of Australia’s rail freight line between Adelaide and Darwin, and make about $105 million a year shifting goods north and south for the likes of Toll, Linfox and Woolworths.
The non-coal business would be expected to attract widespread interest from rival transport and logistics companies, such as ASX-listed Qube Holdings and Pacific National, as well as infrastructure funds.
It’s expected to be much harder to find a mainstream buyer for the coal business - despite its long-term contracts with Glencore and profitability - given widespread investor sentiment towards the coal sector.
MIRA and its bankers, Credit Suisse and Macquarie’s own Macquarie Capital, outlined the potential split in a 10-page sale flyer sent to interested parties this week, saying the business had been readied for such a move.
The flyer pitched One Rail group as a “unique platform of critical infrastructure with a diverse growth pipeline”, and a top three player in Australia’s rail sector.
The flyer said One Rail would record $475 million revenue and $235 million EBITDA this year, owned or leased 2460km of track, had 110 locomotives, 2614 wagons and 650 employees.
It said MIRA, which owns 48 per cent of One Rail and manages the other 52 per cent on behalf of Dutch pension fund PGGM, would consider offers for the business as a whole, or separate bids for the coal and non-coal businesses.
Potential buyers were told the auction would get underway as early as July and MIRA was keen to have a deal signed by the end of the year.
The mooted sale comes five years after MIRA invested in One Rail, which was then known as Genesee & Wyoming Australia (GWA). MIRA bought a stake in GWA to help its US parent Genesee & Wyoming acquire what was Glencore’s Australian coal transport business.
Genesee & Wyoming was acquired by Brookfield in 2019, which saw its GWA stake offered to MIRA. MIRA and PGGM acquired the stake to take full control.
Street Talk revealed MIRA’s plans to test the market for One Rail in October last year. This week’s flyer sees discussions with potential investors ramp up ahead of the auction.