NEW YORK (The Deal) -- Brookfield Asset Management (BAM) - Get Brookfield Asset Management Inc. Class A Report has bid A$8.8 billion ($6.8 billion) in cash and stock for Australian logistics firm Asciano, pursuing a deal that would rank among the largest foreign acquisitions of an Australian business.
Melbourne-based Asciano said Wednesday that it is in exclusive talks with Brookfield Infrastructure Group, a unit of Toronto-based Brookfield Asset Management, after receiving a bid of A$9.05 per share on June 26.
"Discussions are at a very early stage, and a number of significant steps need to be undertaken in order to progress to a formal proposal from Brookfield," Asciano said. "The board also notes that this disclosure may result in Brookfield withdrawing its proposal."
Brookfield's bid underlines investor interest in Australian infrastructure assets, which are considered to offer stable returns due to the nation's strong economy.
The bid comes just under two months after Japan Post Holdings closed its A$6.5 billion takeover of another Australian logistics company, Toll Holdings. Asciano was part of Toll Holdings prior to a 2006 spinoff.
A takeover of Asciano would be the largest in-bound deal for an Australian company since SABMiller (SBMRY) swallowed Australian beer maker Foster's Group in a A$10.5 billion takeover in 2011.
The offer from Brookfield was in cash and stock, with the stock element to be paid in units of the Canadian company's listed infrastructure fund, Brookfield Infrastructure Partners (BIP) - Get Brookfield Infrastructure Partners L.P. Report, Asciano said.
Asciano didn't give the cash/stock breakdown of the A$9.05 per share offer.
The bid was pitched at a 39% premium to Asciano's closing price on June 26. Shares in Asciano climbed sharply on news of the offer but remained 16% below the bid price, hitting A$7.77 each, up A$1.12, or almost 17%, from their Tuesday close.
Asciano operates rail services under the Pacific National brand as well as bulk container ports and terminals.
The company posted earnings before interest, taxes, depreciation and amortization of A$720 million for the financial year ended June 2014 on sales of just under A$4 billion. Sales at the company have grown at an average 8.8% since 2010, while Ebitda has climbed 12.9%.
The company's health is a far cry from its post-de-merger state. Asciano nearly collapsed in 2008 under the weight of about A$4.7 billion of loans and after its market capitalization crumbled from more than A$6 billion to less than A$500 million.
The company was saved by a A$2.35 billion capital increase and has steadily recouped value as it invested in upgrading its operations under the leadership of Chief Executive John Mullen, who took over in 2011.
Asciano had net debt of about A$3.6 billion at the end of last year, of which the first repayment of A$429 million is due during its 2016 financial year, it said during an investor presentation in April.
Shares in Brookfield Infrastructure Partners closed Tuesday at $44.60, marginally higher than their Monday close. Brookfield Asset Management shares closed at $34.93, down 3 cents.
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