Toll may target P&O unit after Patrick rebuff

SYDNEY - Toll Holdings, which had its A$4 billion ($4.37 billion) hostile bid for Patrick Corp thwarted, may revive its expansion plans by buying Peninsular & Oriental Steam Navigation's Australian business, investors and analysts said.

"If they can get it for the right price it would be a good thing," said John Gethin-Jones of Queensland Investment Corp, which holds Toll and Patrick shares. "There's merit in the efficiencies that would be gained by marrying those two."

The Australian Competition & Consumer Commission on Wednesday blocked Melbourne-based Toll's bid for Sydney-based Patrick. It would have delivered Toll, already the nation's biggest road and rail freighter, control of goods from ship to delivery. The regulator said a takeover of Patrick, the nation's biggest port cargo handler, would lessen competition and raise freight prices.

Toll chief executive Paul Little has made 44 acquisitions in two decades at the helm of the company. Buying other businesses won't attract the same scrutiny the Patrick deal did, Gethin-Jones said.

Little wasn't immediately available for comment. In November he said Toll may buy P&O's Australian business if the Patrick offer failed. Patrick chief executive Chris Corrigan also wasn't available for comment.

Singapore's PS International and Dubai's DP World are bidding for P&O to tap into trade growth from Asia. Toll could buy P&O's Australian business from the winning bidder, said Merrill Lynch analyst Simon Mitchell.

P&O's Australian unit is the country's second-biggest ports business, with terminals in Sydney, Melbourne, Brisbane and Fremantle. It may cost Toll about A$1.5 billion, said Mitchell, who was rated Australia's third-best transport analyst in an investor survey by Business Review Weekly.

Toll may also appeal against the regulator's decision in Australia's federal court, said Philip Wensley, an analyst at Morgan Stanley, in a note to clients yesterday. A court battle could take a year and was unlikely to overcome antitrust concerns, he said. "They appear out of growth options," he said.

Toll shares fell for a second day, dropping 4.3 per cent to A$12.15.

- BLOOMBERG