Logistics group Qube has moved a step closer to acquiring Patrick container ports after Asciano's board said it was terminating its takeover agreement with Brookfield Infrastructure and recommending a rival $9.05 billion bid from the Qube consortium.
Asciano, which had previously recommended Brookfield's cash and stock bid to investors, will pay the Canadian group an $88 million break fee after the infrastructure group missed a deadline to meet or beat Qube's offer.
"The Brookfield bid will now be terminated and the Brookfield takeover bid is expected to lapse at 7pm on February 18," Asciano said.
Qube and its consortium partners – Global Infrastructure Partners, the Canada Pension Plan Investment Board and the China Investment Corporation - raised their bid for Asciano in early February by 7¢ to offer $7.04 in cash and one Qube share for every Asciano share, challenging Brookfield's existing bid.
Qube's shares closed up 4¢ at $2.03, valuing its offer for Asciano at $9.07 per share. Asciano's shares closed flat at $8.90.
Brookfield, which has been working on a revised all-cash bid worth $9.28 per Asciano share, was unable to meet a five-day deadline to match the bid that expired on Monday.
Brookfield had previously offered $6.94 in cash and 0.0387 of its New York-listed units for Asciano, valuing the ports and rail group at $8.79.
Brookfield is expected to continue putting together an all cash bid, and finalise the details before the Australian Competition and Consumer Commission's March 24 deadline for reviewing both Brookfield's and Qube's offers.
If Brookfield returns with a higher all cash offer, Asciano will need to give the Qube consortium five days to match or beat it.
If Brookfield ends up acquiring Asciano, the ports and rail group will have to pay Qube an $88 million break fee.
Asciano will only have to pay Qube a break fee if a transaction with Brookfield eventuates. It will not have to pay Qube a break fee if the ports and rail group changes its recommendation back to Brookfield.
If Brookfield does make a higher all-cash offer, the Qube consortium would consider increasing the portion of cash in its bid, or also making an all-cash bid.
Brookfield has claimed that Australian takeover laws prevented it from raising its bid for Asciano within the five-day matching period.
The Canadian group wants to add two additional members to its existing consortium, Canadian pension fund PSP Investments and the Qatar Investment Authority, to buy Pacific National's intermodal business and help fund an all cash offer.
Brookfield's consortium already includes British Columbia Investment Management Corporation and Singapore sovereign wealth fund GIC.
Brookfield could not legally change its consortium before February 15 because a small number of investors had already accepted its takeover offer, bringing its shareholding in Asciano above 20 per cent.
Under takeover laws, a bidder cannot change its consortium while owning more than 20 per cent of a target.
Qube said that the combination of its logistics business with Asciano's Patrick container ports businesses would be "transformational."
Qube plans to merge Patrick ports with its existing logistics business while its consortium partners would take Asciano's Pacific National Rail business.
"The combination creates significant opportunities for productivity improvement and innovation across the Australian logistics and transportation sector, delivering substantial value for Qube shareholders as well as the broader logistics chain," Qube said.