Genesee & Wyoming Australia (GWA) has entered an agreement to acquire Glencore Rail (GRail) for $1.14 billion, beating earlier bids from Pacific National and Aurizon.
Glencore announced the sale of GRail as part of its plan to drive down debt, with Aurizon and Pacific National submitting proposals to the Australian Competition and Consumer Commission (ACCC) in August.
The ACCC then released a Statement of Issues in relation to the bids, arguing that having the two competitors would “substantially lessen competition” in the coal haulage market.
GWA’s parent company Genesee & Wyoming (G&W) said the agreement would strengthen their footprint in Australia by adding a significant presence in the Hunter Valley coal supply chain.
The deal includes the acquisition of nine train sets (30 locomotives and 894 wagons) and adds $100 million of 2017 EBITDA which is expected to grow to $150 million in the medium term.
In conjunction with the acquisition, GWA will enter a 20-year rail haulage contract with Glencore Coal (GC), having the rights to exclusively haul all coal produced at GC’s existing mines in the Hunter Valley to the Port of Newcastle. This will have minimum guaranteed volumes over the first 18 years with initial volumes under the rail haulage contract expected to be around 40 million tonnes per year.
G&W president and CEO Jack Hellmann said, “We are pleased to be enhancing our existing relationship with Glencore through a two‐decade rail haulage contract that provides for exclusive rights to rail shipments from some of the premier steam coal mines in the world, serving end users in Japan, South Korea, Taiwan and Southeast Asia.”