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Macquarie Group's infrastructure arm is tipped to buy out Hunter Valley coal carrier and Darwin-to-Adelaide rail operator, Genesee Wyoming Australia (GWA), in a deal likely to value the business at more than $2 billion.
Up for grabs is a 51.1 per cent stake in the Australian rail business, which for now is owned by US-listed Genesee Wyoming Australia and is set to fall into the hands of Canadian giant Brookfield Infrastructure Partners as part of a wider $US8.4 billion takeover.
While Brookfield has big plans for Genesee & Wyoming's North American business, it wants to divest the Australian arm GWA.
MIRA picked up a 48.8 per cent stake in Genesee & Wyomnig Australia in late 2016, in a deal that help G&W buy Glencore's Hunter Valley coal haulage unit. George Frey
Brookfield already has a bunch of similar and even competing assets in Australia, including a Western Australian rail network, Queensland coal port and Asciano's Patrick shipping container terminal business, and isn't proposing to double down on these shores.
And the canny Canadian knows it shouldn't be too hard to find a buyer for the GWA stake. Because Genesee & Wyoming's joint venture partner in Australia is the cashed up and deal hungry Macquarie Infrastructure and Real Assets, which owns the other 48.9 per cent.
It is understood there have already been some high level talks between the parties to discuss whether MIRA would be interested in using its pre-emptive rights to take full control of GWA. The rights were picked up when MIRA bought its 48.8 per cent stake in December 2016.
MIRA is believed to be keen to exercise its right provided it can come to terms with GWA's controlling shareholder in waiting, Brookfield. It may well take a few months or back and forth talks, but MIRA widely tipped to pre-empt what would otherwise be a competitive auction and take the stake.
MIRA could then decide whether to selldown to partners of its choosing, as it has with similar Australian buyouts in the past.
Sources said the pre-emptive process hadn't formally started, which leaves the ball officially in Brookfield's court.
The Canadian, advised by Citi on the Genesee & Wyoming bid - which is the same bank it has tapped in Australia for a utility divestment - has given itself months to turn up with a fully funded and executable deal with all the regulatory and other approvals. The GWA selldown, dubbed Snow Australia Divestiture in the formal literature, is expected to be part of the mix.
GWA had about 700 staff and $US300 million revenue in the 2018 financial year, according to G&W's most recent annual report. The bulk of its revenue was from hauling coke and coal and intermodal freight.
This article first appeared on www.afr.com
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