The bitter row between Toll Holdings and Patrick Corp, equal joint owners of rail freight operator Pacific National, shows no sign of abating.
Toll is pressing ahead with its A$4·6bn hostile bid to take over Patrick, but this is stalled by the intervention of Australia’s competition regulator (RG 12.05 p747). ACCC’s Chairman Graeme Samuel fears that Toll’s dominance of the interstate freight market would stifle competition, especially between Perth and the eastern states.
Having received Samuel’s reaction to concessions offered by Toll, the company came up with further proposals on December 13. To make competition easier for Specialised Container Services, or a new entrant, Toll has increased from six to nine the number of its locomotives available for hire. It has offered to accept timetable path changes for the same reason.
PN already hauls SCS trains on a hook-and-pull basis, and this would continue until SCS takes delivery of 11 locos that it has ordered. On terminals, PN has offered to surrender its lease on the Dynon intermodal terminal in Melbourne. Dynon would revert to VicTrack and become open access.
Patrick responded with a claim that ’Toll continues to narrowly confine its undertakings to the regulator, leaving major gaps in their response to the core issue of market dominance resulting from their takeover bid.’ Patrick also claimed that ’Toll continues to largely ignore competition issues arising from full ownership of the major rail freight terminals in Australia’s capital cities.’
Also on December 13, a PN board meeting broke up when Toll CEO Paul Little refused to accept a demand by Stephen O’Donnell - who resigned in frustration as PN CEO in October - that he be paid almost A$2m to resume his post. Patrick CEO Chris Corrigan stormed out when Little circulated a list of five candidates that included himself and Corrigan, and all five names were rejected by the directors.
Little’s response was to appoint himself as PN CEO, but Corrigan and his fellow Patrick directors issued a statement to the stock exchange accusing Little of attempting to ’assume executive control of Pacific National without board approval’. Corrigan insisted that Little was ’neither authorised nor qualified’ to be CEO, and thus formally responsible for safety. Patrick had earlier dropped a further spanner in the regulatory works by threatening to revive an agreed takeover of freight forwarder FCL Transport Services. Clearly, Toll’s market dominance would be even worse if it swallowed a merged Patrick-FCL operation.
Meanwhile, up in Brisbane, Queensland Rail’s CEO Bob Scheuber is watching the pantomime and waiting to pounce when the time is right. Still 100% government-owned, QR is the largest and richest of the former state railways, and Scheuber would like to spread his wings. In April 2005 QR hauled its first coal train from Newpac mine in NSW to Newcastle, and in November he told a journalist ’there will be two major rail players in the future. Quite clearly, QR wants to be one of those two players.’