Rio Tinto looks to have Riversdale Mining in the bag after possible Indian suitor ICVL decides against launching a counterbid, while Fletcher Buildings bites the bullet and raises its offer for Crane group. Meanwhile, a capital equity looks on the cards for Downer EDI, a Canadian pension fund buys up great Southern's timber plantations and LNG Limited finds a Chinese partner. Elsewhere, QBE continues its acquisitive streak, changes at the top for Transpacific and Transurban and Eddy Groves faces 20 years in prison.
Rio Tinto, Riversdale Mining, ICVL
Rio Tinto is in the box seat to take control of coal miner Riversdale Mining after a highly anticipated bid from an Indian rival failed to materialise. The consortium International Coal Ventures Limited (ICVL) took its time before making up its mind and after a lot of sabre rattling the end result has been a rather predictable no show. ICVL– a joint venture between Coal India, Steel Authority of India, iron ore miner NMDC, power company NTPC and steel company RINL – has decided not to counter Rio Tinto’s $US3.9 billion bid for Riversdale with Coal India chairman Partha Bhattacharyya telling Reuters that the consortium was not willing to trump Rio’s offer despite a recommendation from its advisor Citigroup to pursue a counter bid at around $US18 a share. According to India’s Economic Times, the decision was taken unanimously by the ICVL board, however, the consortium has been reluctant to reveal details. ICVL’s move presumably has little to do with a lack of financial strength but perhaps a sign of its inexperience in the M&A game. The public sector companies in the consortium may be domestic heavyweights in their sector but unlike some of their private sector counterparts – Tata, Essar, Adani Group – have little or no experience of running an overseas entity. ICVL’s decision probably puts to bed any talk of a bidding war for Riversdale and with the target’s board unanimously backing Rio’s bid the mining giant may be on the cusp of sealing its first big acquisition since its purchase of Alcan in 2007.
Crane Group, Fletcher Building
The takeover tussle between Crane Group and Fletcher Building looks to have been resolved with both parties reportedly expected to formally announce a deal as early as today. Fletcher launched its $736 million hostile bid for the plumbing supplies and plastic pipelines maker just before Christmas after buying shares from several of Crane’s biggest shareholders – Suncorp, Perpetual and Maple Brown Abbott, however, it’s been a tough slog since then with little progress, despite Fletcher raising its bid once to $741 million. That may be about the change with The Australian saying that the two parties are locked in serious negotiations after Fletcher agreed to raise the cash component of its offer to $10 a share. Crane recently released an independent report which labelled Fletcher’s bid inadequate – while Fletcher had rejected the report speculation was building that the suitor may have to either sweeten its bid or offer Crane’s shareholders a special dividend. Crane’s boss Greg Sedgwick has so far been resolute in the defence against Fletcher and at one point there was even talk of rival bidders. According to The Australian Financial Review, UK’s Wolsley Group and Woolworths had expressed their interest but nothing concrete materialised. Either ways, the steadfastness of Crane’s management and the threat of a rival suitor looks to have been enough for Fletcher to further sweeten its offer to secure its bid.
Downer EDI shares dived yesterday as investors digested the news of the $250 million provision on the $1.9 billion Waratah train project. The entire exercise is now 13 to 14 months behind schedule and Downer expects the first trains to roll in by late April and the final train set to be completed by September 5th, 2013. The company will report its half-year results, including final details of the Waratah project, on February 24 and by that time one expects an equity raising should well and truly be on the cards. Fitch has placed Downer’s BBB rating on negative watch, just short of a full downgrade, in a clear warning that Downer will have to tap the market to reduce its credit risk. Any equity raising is also expected to be highly dilutive with some saying that it could be priced below $3. Downer has appointed Ross Spicer, who has some experience in the field, as the new head of the Waratah project. Downer’s boss Grant Fenn is no doubt hoping that the appointment will go some way in fixing the credibility problems plaguing the company but it all comes down to what price investors put on management’s ability to deal with the issue. The Waratah project has taken a substantial toll on the company whose shares were trading around the $9 mark last year this time. They ended the session yesterday at around $3.60 and given that sort of performance Downer shareholders will certainly hope that this is the last project the company will get from the NSW government and Railcorp.
Alberta Investment Management Corp, Great Southern
Canada‘s Alberta Investment Management Corp (AIMCo) has sealed a $415 million deal to buy over 250,000 hectares of timber land formerly controlled by collapsed managed investment scheme operator Great Southern. The $C71 billion pension fund, run by Australian-born Leo de Bever, has teamed up with Australia New Zealand Forest Fund to buy the assets. Sydney-based timber investment management company New Forests has been appointed to manage the assets on behalf of its new owners. The deal is one of the largest in Australia's forestry estate business and comes after a year of negotiation with de Bever, who had a tenure with the Victorian Funds Management Corporation as its chief investment officer, reportedly driving a hard line. According to The Australian Financial Review, the $415 million deal will see Great Southern’s receiver’s recoup only 60 per cent of the land’s valuation of three years ago. As AIMCo and de Bever point out in a press release there are always advantages to buying assets with receivers.
LNG Limited, CNPC
Perth-based energy company Liquefied Natural Gas Limited (LNG) is set to reveal a landmark deal with a unit of Chinese energy heavyweight China National Petroleum Corporation (CNPC), which should go a long way in resuscitating the company’s Fisherman Landing project. According to CNPC, its engineering division – China Huanqiu Contracting & Engineering Corporation – will become LNG’s largest shareholder after buying a 19.9 per cent stake in the company. While CNPC did not disclose the value of the transaction the AFR suggest that the figure could be around $23 million. The Chinese group will take a seat on LNG’s board and provide a senior executive in a full time role.
Collapsed childcare centre operator ABC Learning Centre’s boss Eddy Groves is set to have his day in court today with the one-time tycoon possibly facing the prospect of 20 years behind bars. According to the AFR, Groves is facing four charges under section 184 of the Corporations Act in the Brisbane Magistrates Court. Each charge carries a maximum jail term of five years. Groves will be joined by the head of ABC’s Australian operations, Martin Kemp, with the charges expected to centre around alleged breaches of directors' duties over the role the two men played in the collapse of the company that had been worth $3.5 billion. In other news, QBE Insurance Group has taken another step in strengthening its presence in the Australian credit union and community-based financial institutions insurance market with the acquisition of the Australian operations of US-owned CUNA Mutual Group. QBE expects the deal, scheduled for completion in March, to generate in excess of $80 million of gross written premium in 2011. Waste management company Transpacific Industries has appointed a new chief executive with CFO Kevin Campbell replacing current boss Trevor Coonan. Elsewhere, Transurban Group has reshuffled its executive management ranks with chief operating officer Brendan Bourke set to depart after spending more than a decade with the toll road operator. Transurban’s group public affairs manager Megan Fletcher is also on the way out and will be replaced by Wesley Ballantine. In more appointment news, Photon Group has added Omnicom's president for retail agencies, Craig Hart, to its senior management team. Hart, a former lawyer, will lead Photon’s field and retail group, which includes businesses based in Australia and the UK. Meanwhile, rare earths producer Lynas Corporation has been garnering a lot of positive reviews off-late, however, analysts at Citigroup don’t seem all that convinced, According to The Australian Financial Review, Citigroup has initiated coverage on Lynas with a sell rating, saying that the recent rise in rare earth oxide prices is unsustainable. The analysts say that the bullish supply demand dynamics currently in the market is set to moderate going forward and will lead to lower prices. Take that into account with the fact that Lynas still has to get its processing plant up and running in Malaysia and maybe everything is not as rosy as it seems. In other news, Sydney based gold miner Centius Gold is set to make its debut on the ASX today. The miner raised more than $5 million in a recent IPO, at an issue price of 20 cents each, and the miner has a substantial portfolio of exploration projects in New South Wales and Queensland. In international news, the planned $10 billion IPO of Glencore International has sparked speculation that the move could be precursor to a merger between the commodities trader and Swiss mining giant Xstrata. According to The Wall Street Journal, the Glencore IPO is expected to value the company at as much as $US60 billion and the move will not only give Glencore a market value but also provide extensive disclosure of Glencore's business activities. Some analysts reckon this could be just the thing to clear the way for a tie-up between the two companies.