BREAKFAST DEALS: ADM advance

ADM talks up Australian investment as the FIRB eyes its GrainCorp bid, while Etihad Airways sits on a prime opportunity.

The spotlight is now on FIRB, with the ACCC approving ADM’s bid for GrainCorp and the suitor’s boss is adding her voice to the discussion. Speaking of FIRB, Etihad Airways has got the green light to take 20 per cent of Virgin Australia, making for one crowded register. Meanwhile, another player is bailing on Billabong, The Trust Company has taken a moment to pause on Equity Trustees synergies and Nathan Tinkler has at long last met a deadline.

GrainCorp, Archer Daniels Midland

US grains giant Archer Daniels Midland, led by chief executive Patricia Woertz, is turning its attention to Australian Foreign Investment Review Board after winning approval from the consumer watchdog to acquire east coast exporter GrainCorp for $3 billion-plus.

As part of a visit to Australia this week to, among other things, meet with GrainCorp counterpart Alison Watkins, Woertz has talked up the prospect of major investments in the ASX-listed grain exporter in a bid to ease the concerns of local farmers.

“We’re not here to cut costs, we’re here to invest," Woertz told The Australian Financial Review after meeting with Watkins. “I think it’s really is about growing together.”

Woertz hasn’t just reaffirmed ADM’s commitment to investing $300 million in GrainCorp – of which $250 million was earmarked by the target – but also added that the falling Australian dollar would be a benefit for exporters and, by association, farmers.

Yesterday, ADM secured the approval of the Australian Competition and Consumer Commission to take GrainCorp for $12.20 a share, plus a $1 fully franked dividend.

The two important matters that the ACCC focussed on were domestic competition and port access.

On the first issue, ACCC chairman Rod Sims was happy with the deal because ADM’s existing Australian business commands a small percentage of exports.

On the second issue, Sims said the watchdog would keep an eye on the shift to mandatory codes that currently come as undertakings to the Wheat Export Market Act.

FIRB is the next regulator that ADM has to win over. While Woertz’s visit to Australia does coincide nicely with the approval from the ACCC, it has also been joined by the political upheaval in Canberra.

Ultimately, the government has to approve the ADM bid and most of the opposition has come from the Nationals. But it’s fair to say implications of the ‘What now with Kevin Rudd? question are as far reaching as the power of the office of the prime minister and the returning man’s imagination.

Virgin Australia, Etihad Airways

The Foreign Investment Review Board did give a decision yesterday, but it had nothing to do with GrainCorp.

James Hogan, chief executive of Etihad Airways, has received approval from FIRB to lift the Middle Eastern carrier’s stake in Virgin Australia to 19.9 per cent from its current level of 10 per cent.

Virgin chief John Borghetti has done a good job running tight rings around larger rival Qantas Airways, his former employer, with a string of alliances with major global airlines. However, the register is now becoming very, very crowded.

FIRB’s approval makes perfect sense given that Air New Zealand – which has just added $3 million to the marketing budget of Tourism Australia – recently increased its stake to 23 per cent from 20 per cent and is seeking permission to go to 26 per cent, while Singapore Airlines has moved to 19.9 per cent after buying a stake from Sir Richard Branson’s Virgin Group.

Hogan has stated publicly that the airline is happy to sit for now at 10 per cent, but the suspicion is that it will move to increase its stake when an opportunity presents itself. It’s well known that Hogan was unhappy with Sir Richard’s decision to sell to Singapore Airlines.

That was a prime opportunity.

The Singapore Airlines sale coincided with Virgin’s acquisition of a majority stake in the carrier’s struggling, lowest-cost operator Tiger Australia. It seems so bloody logical now, but before the announcement no one really saw it coming.

With such a large majority of the register spoken for by big investors, Hogan’s best bet for a 20 per cent stake, if Etihad wants to go that high, is Branson.

Whether or not Sir Richard wants to sell the remaining 12.7 per cent stake in Virgin Australia is difficult to tell definitively. The only thing we really have to go on is he has demonstrated a willingness to sell and Hogan’s incentive to buy is pretty significant.

Delta Air Lines is the only alliance partner of Virgin that as of yet hasn’t joined the fray for Virgin stock.

As yet, the other alliance partners have not used their stakes to leverage a board seat, or even request one. However, it’s very conceivable that they will at some point and under that scenario a 20 per cent stake becomes hugely important for Hogan and Etihad.

Virgin Australia is headquartered in Brisbane. Whatever happens with Etihad, this columnist would like to see the La Boite Theatre Company put on Servant To Two Masters and invite Borghetti to the opening night.

You can just imagine his review: “Only two masters? This Truffaldino bloke isn’t working hard enough!”

Billabong International

Another day, another Billabong International stakeholder sells.

A notice to the ASX yesterday indicates that fund manager Perennial Value has sold about half its stake in the embattled surfwear company.

Perennial has offloaded 19.3 million shares since January, slashing its stake to around 4 per cent from a little over 8.5 per cent.

Billabong shares shed another 1.5 cents yesterday to finish the session at 16.5 cents apiece, for a market cap of $79 million.

The Trust Company, Perpetual, Equity Trustees

Takeover target The Trust Company has put the scheme process with Perpetual on hold for a moment to take another look at the rival offer from Equity Trustees.

The financial trustee indicated its interest in ET’s (everyone else abbreviates them to EQT, but how boring is that?) revised synergy estimates, which have been bumped to $15 million per year from $8 million to $11 million per year.

Trust has tapped Ernst & Young to investigate this claim about potential synergies, along with some other assertions that Trust has labelled “inaccurate” or “without sound basis”.

It’s difficult to imagine that Trust would go chasing these claims if two events hadn’t happened. ET has increased the equity component for its takeover offer and Perpetual’s share price has fallen hard.

The ET board said it wants to get this second glimpse completed as soon as possible and has “offered Perpetual the same opportunity to outline the basis of its synergy estimate”.

Wrapping up

Nathan Tinkler has paid the $12 million he owes to Blackwood Corporation two days before deadline, which will bring to an end insolvent trading proceedings and maintain the veil of secrecy over the details of his family trust.

The payment comes mere days after creditor Farallon Capital pulled the trigger and snatched his beloved stake in Whitehaven Coal.

And finally, the battle for Careers Australia Group has quickened, according to The Australian Financial Review, with Crescent Capital Partners set to emerge as the winner with a deal worth $107 million.

For those interested, the company that lost the race was Europe’s White Cloud Capital Advisors, which was rebuffed earlier this month.