HAVING received no assurance that Toll Holdings will respect its decision to block Toll’s hostile takeover bid for Patrick Corp, the Australian Competition & Consumer Commission launched Federal Court proceedings against the firm on February 9.
ACCC is seeking an injunction against Toll acquiring any further interest in Patrick, or taking any steps to increase its control of or influence over Patrick. ACCC also wants the court to rule that, following its decision of January 18 blocking the merger (RG 2.06 p68), Toll would be in breach of Section 50 of the Trade Practices Act. A hearing before Justice Merkel was scheduled for February 27. Toll meanwhile extended to March 13 its A$4·6bn offer for Patrick in the hope that ACCC’s action would fail.
The stakes were raised significantly on February 15 when Toll commenced proceedings in the Supreme Court of Victoria ’to protect its Pacific National rail joint venture from attempts by Patrick to destroy its underlying value’. Accusing Patrick of waging ’a verbal, legal and media assault’ on PN, Toll alleged that its rival had engaged in ’oppressive conduct’ by threatening to start winding up PN, by frustrating Toll’s attempts to appoint a new CEO to replace Stephen O’Donnell, and by seeking to obstruct appointment of a senior official with safety responsibility at PN.
Having given notice on January 23 that it would seek to break up PN, Patrick began proceedings on February 15 to do precisely that, although Toll had beaten it by a few hours. A directions hearing is set for March 17. This suggests an argument over which case should be heard first - although there may be good reason to take them together.
Patrick claims that ’there has been a total breakdown in the relationship between the shareholders, Patrick and Toll, and a complete loss of confidence and trust by Patrick in Toll.’ Managing Director Chris Corrigan said that PN had become ’dysfunctional’, and that ’we can no longer stand by while the business continues to suffer’.
None of this is good news for PN staff, management or customers, who face a new competitor in the form of Queensland Rail. The sale of Australian Railroad Group to QR and Babcock & Brown (p111) changes the competitive landscape dramatically.