The Transurban Group (ASX: TCL) share price is down 2% after the ACCC blocked the toll road business from acquiring Eastlink.
Transurban is a large toll road operator in Australia, and also has operations in North America.
Transurban share price
ACCC blocks deal
The ACCC announced today that it opposes Transurban’s proposed acquisition of a majority interest of Horizon Roads, which operates the Eastlink toll road in Melbourne and is the only other private toll road operator in Australia.
In Melbourne, Transurban already operates the CityLink toll road, and it’s constructing and will operate the West Gate Tunnel toll road.
The ACCC decided to block the deal because it would entrench Transurban’s position in Victoria and “prevent the entry of a rival operator which could compete closely for future toll road concessions” in Victoria.
The ACCC noted that Transurban would operate every single private-sector controlled toll road in Australia.
There were a number of submissions to the ACCC regarding strong concerns from stakeholders, including the Victorian Government which outlined concerns. It was the Victorian Government’s concerns that the ACCC put some significance on.
Transurban’s scale and in-house modelling provide it with an advantage over rival bidders for toll roads, according to the ACCC. I’m going to take this as a backhanded compliment for Transurban shares.
ACCC comments
ACCC Chair Gina Cass-Gottlieb said:
We have concluded that if Transurban doesn’t acquire Horizon Roads, it would likely be acquired by a potential long-term rival and could be used as a platform to develop the capabilities needed to compete more strongly for other toll road concessions.
We therefore found that Transurban acquiring Horizon Roads would likely deter the emergence of a key rival for future toll road concessions.
We acknowledge that the Victorian Government can run open tender processes, but where one party has material incumbency advantages compared to other firms who may be considering bidding there is less likely to be effective competition for future sale processes.
Transurban response
Transurban said it was disappointed by the decision and that it was confident the acquisition would not substantially lessen competition.
It’s closely reviewing the decision and will “consider all the options available to it”.
Transurban also noted that the decision is limited to Eastlink and doesn’t mean Transurban can’t participate in other future development or transaction opportunities, including in Victoria.
My 2 cents on the Transurban share price
With the Transurban share price now trading at close to its 2023 low, it could be an interesting time to look at the toll road operator, though it wouldn’t be first pick for income among ASX dividend shares.
