Brookfield Infrastructure is under pressure to formalise a higher cash bid for Asciano after the ports and rail group's board declared a revised $9.05 billion bid from rival Qube "superior".
Qube and its consortium partners – Global Infrastructure Partners, the Canada Pension Plan Investment Board and the China Investment Corporation – have increased their offer for Asciano by 7¢ to offer $7.04 in cash plus one Qube share for every Asciano share.
Based on Qube's closing share of $2.20 a share, the bid values the ports and rail group at $9.24 a share, or $9.05 billion.
Asciano's shares rose 21¢ to $9.10 on Monday.
Brookfield now has five days to match the Qube offer under its original agreement with Asciano.
"If Brookfield does not submit a matching or superior proposal within the required time frame, the Asciano board will be able to change its recommendation and execute the Qube consortium agreements," Asciano said.
The Canadian group has already indicated to Asciano that it is prepared to raise its cash and stock offer.
Brookfield Infrastructure chief executive Sam Pollock told Asciano chairman Malcolm Broomhead in a letter on February 7 that the group had been working on a revised proposal to offer $9.28 a share in cash.
It had previously offered $6.94 in cash and 0.0387 of its units, which are listed in New York and Toronto.
"We are working diligently to bring forward a revised transaction that is fully executable under the terms of the undertakings that we have filed with the Australian Competition and Consumer Commission," Mr Pollock said.
"Our revised transaction will be on an all cash basis at a value of $9.28 per share less any dividends declared by the board."
The revised proposal would commit to selling Asciano's intermodal business to satisfy competition concerns, Brookfield said.
However, the procedure for Brookfield to revise its proposal is complicated and Asciano said on Monday there was no certainty that a new proposal from Brookfield would be made.
Help to fund a bigger offer
Brookfield wants to bring into two additional members to its consortium, which already includes British Columbia Investment Management Corporation and Singapore sovereign wealth fund GIC, to buy the intermodal business and help fund a higher offer.
It is understood the two new members are the Qatar Investment Authority and a large international pension fund.
But Brookfield cannot change its consortium before the end of the five-day matching right period, which concludes on Monday February 15, because a small number of investors have accepted its current takeover offer, and it now owns more than 20 per cent of Asciano.
Under takeover laws, a bidder cannot change its consortium while owning more than 20 per cent of a target.
This means Brookfield needs to find another way of making an all-cash bid for Asciano – such as asking the Australian Securities and Investments Commission for temporary relief from takeover rules – before the five-day period expires.
Brookfield could also return with a revised bid for Asciano after February 18, when its current takeover offer expires, because it is then allowed to change the members of its consortium.
If Asciano recommends Qube's current offer in the meantime, it will trigger a $88 million break fee payable to Brookfield within 48 hours – giving the Canadian group cash to help fund a higher bid.
If Asicano does recommend Qube's offer, is understood to be considering awarding Qube a standard break fee that would be payable if a change of control occurs. Brookfield's break fee was payable on a change of board recommendation.
Brookfield has warned Asciano that if it comes back with a higher revised offer after Asciano has accepted a bid from Qube, Brookfield will reduce the value of its cash bid by 9¢ a share to account for the break fee Asciano will then need to pay Qube.
"Any financial commitment to the Qube consortium that could be triggered as a result of our transaction would simply erode the value of Asciano to the detriment of its current shareholders, and would necessitate a commensurate reduction in our proposed bid price," Mr Pollock said in the letter.
Brookfield would prefer Asciano to wait until the ACCC has ruled on both bids before it makes a decision on which offer to recommend.
Both Qube and Brookfield's proposals require approval from the ACCC before they can proceed.
The competition watchdog has moved its final decision date to March 24 from February 18 for both takeover bids, arguing it needs more time to analyse them.
The ACCC is reviewing the complicated ports and rail split up proposed by the Qube consortium. Qube wants to acquire Asciano's Patrick ports business while its partners will take Pacific National rail.
It is also seeking advice on whether Brookfield would be able to easily split apart Asciano's intermodal business from the rest of Pacific National.
