Pair in transport battle
Date : 28/08/2005
Reporter: Stephen Long
ALAN KOHLER: Well, it's not often that the shrewd and tough Patrick Corporation boss, Chris Corrigan, finds himself railroaded particularly by a business partner. But this week surprise and hostile $4.6 billion takeover bid from Toll Holdings' Paul Little leaves Mr Corrigan on the defensive and facing the very real prospect of being shunted out of the transport empire he has built. Stephen Long reports.
STEPHEN LONG: It's been two years in the planning and Monday was D-Day for an audacious player that could transform the transport industry. Toll Holdings' results briefing is usually a pretty low key affair on the corporate calendar but with its boss Paul Little announcing a hostile bid for Chris Corrigan's Patrick Corporation, the Sydney presentation became a blockbuster.
PAUL LITTLE: Market speculation has been constant about the merging of Toll and Patrick and today I'm pleased to announce that we are proposing an acquisition.
STEPHEN LONG: If Toll pulls it off, it will become the fourth biggest transport and logistics company in the world.
PAUL LITTLE: Specifically the merged business will have a market cap of around $8.6 billion making the company a top 25 ASX listed entity and a strong financial capacity for future growth initiatives.
STEPHEN LONG: Toll's bid has turned tables on Chris Corrigan who with docks and railways and a passenger airline seem to be the budding transport tsar. Now, Mr Corrigan could lose it all. And Paul Little could become a modern day Vanderbuilt.
KEVIN CHINNERY: You'll have a very, very large company offering transport and distribution services in so many different areas on such a scale that nobody else is really going to come close to competing with them.
STEPHEN LONG: If it swallows up Patrick, Toll will become the only operator offering end-to-end transport from dock to shop, a seemless web of boats, cranes, planes, trains and automobiles. But the ACCC may not think a vertically integrated transport behemoth is such a good thing.
CHARLES DALZIELL: Well, I think there's certainly a lot of things that the ACCC have to look at.
STEPHEN LONG: And competitors are already voicing concerns about what the takeover will mean.
PETER FOX: Absolutely, absolutely lessening competition and definitely a consolidation of power in one organisation in the industry.
STEPHEN LONG: When Paul Little spoke to Inside Business a few days after launching the Patrick bid, he was still on a high and still wearing the same tie.
PAUL LITTLE: It has been incredibly busy of course, but also very positive and I think quite rewarding, getting some excellent feedback from those that we have been talking to.
STEPHEN LONG: How are institutional investors reacting?
PAUL LITTLE: Well, they are reacting pretty much I think the way you would have expected. We have had no one being critical of the logic that sits behind what we are doing and a lot of support about the creation of this cross-border logistics capability.
STEPHEN LONG: Even though Chris Corrigan's people have been bad mouthing the bid in private briefings far and wide. How do you respond to the criticisms coming from Corrigan camp?
PAUL LITTLE: What criticism is that?
STEPHEN LONG: Well, they are saying that Patrick has got good high value assets and Toll has essentially been cobbled together through acquisitions.
PAUL LITTLE: Well, that's a little bit harsh given that the Patrick Group have in fact spent $1.7 billion on acquisitions in the last five years and I think Toll spent some $800 million.
STEPHEN LONG: There are plenty who think the $6.70 a share offer is well shy of the money.
CHARLES DALZIELL: I would say in its current form it's got virtually zero chance of success.
STEPHEN LONG: Charles Dalziell at MMC Asset Management, says you can't underestimate the Corrigan factor, shareholder support for the man who took on the maritime union and transformed productivity on the docks.
CHARLES DALZIELL: Chris Corrigan since 1997 has delivered 40 per cent per annum plus compound annual growth to his shareholders and I think combined with the strength of the assets that he has that just means that there's going to be some very, very loyal shareholders who just love Chris Corrigan and what he has been doing there and love the assets that are in the Patrick business and, you know, won't budge for a low ball bid.
STEPHEN LONG: But of course there's loyalty and then there's business. Behind me is Patrick's Sydney container terminal at Port Botany, one of the key assets that Toll is seeking to acquire. If Toll gets the Patrick prize, it will control 40 per cent of the nation's docks as well as 100 per cent of the rail freight business, Pacific National, which dominates the market in key states. It's a vast reach.
Toll's major rival Linfox is building a new warehouse just up the road from the Port Botany container terminal. When I spoke to him there, Linfox chairman Peter Fox said he didn't want to pre-empt the ACCC's inquiries but his own views were clear.
PETER FOX: Definitely, yes. I do have concerns about the further consolidation of power of one organisation in the industry across road, rail, sea and air.
STEPHEN LONG: So at the end of the day, push come to shove, you don't think one company should have so much power?
PETER FOX: That's absolutely right.
STEPHEN LONG: The plan has been given the thumbs up by the nation's biggest grocery chain.
PETER CORBETT: I think that the Patrick Toll merger if it goes ahead or purchase whichever way you like to look at it, will be a step in building greater efficiency in the all important logistics movement in Australia.
CHARLES DALZIELL: It surprises me that Roger Corbett comes out and says he's looking forward to the lower costs to his business involved in this deal, and it seems counterintuitive to me that you can hand somebody a whole lot more power over the whole logistics and distribution part of the business and expect there to be lower costs associated with that. Monopolists don't tend to be well renowned for passing on their monopoly profits to their customers.
STEPHEN LONG: The ACCC has already received complaints from small trucking operators claiming the existing port and rail freight duopolies grant their own trucks preferential access, but Toll scoffs at suggestions it could or would abuse its market power.
PAUL LITTLE: If we alienate, either by market behaviour or through price concerns or even service concerns, if we alienate those customers they will simply take their business elsewhere. There are other choices available to them.
STEPHEN LONG: If the ACCC doesn't reverse the Toll bid or make an offload assets, you still can't write off Chris Corrigan. He and Patrick chairman Peter Scanlon are well schooled in the art of bare-knuckle takeover brawling.
KEVIN CHINNERY: He's certainly well capable of mounting a counter attack on Toll. I mean, we all know him of old and he is an audacious player. He could well turn up with a white knight of some sort.
STEPHEN LONG: Then there's the possibility of a third player.
CHARLES DALZIELL: A stevedoring asset like the one Patrick owns running the ports would be very attractive to a Macquarie Bank or a Babcock & Brown. I mean, they could package that up and do their financial engineering tricks and create a lot of value.
STEPHEN LONG: Paul Little has been scrupulously polite about Chris Corrigan all this week, though it's not clear how well they get along.
PAUL LITTLE: Were we friends? Look, I'm not quite sure what you mean by friends but the relationship I think has been sound. We don't mix socially outside of the business environment but I would regard Chris as a person who is very proud, has made a huge impact on this industry and one that we would love to have still with us post the outcome of the transaction.
STEPHEN LONG: But as this plays out you get the feeling there could be a lot of blood under the dock and the rivals may not want too much truck with each other over the long haul.
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VIDEO at foot of this page:
http://www.abc.net.au/insidebusiness/content/2005/s1447774.htm
Toll Holdings' Paul Little and Patrick Corporation's Chris Corrigan have vastly different personalities. But both men share the same business aim - to build Australia's biggest road, rail, port and aviation conglomerate.