BREAKFAST DEALS: Australand grab

GPT Group and Mirvac could become rivals for Australand, while analysts question the timing of Alumina's CITIC placement.

It was a bold display from GPT Group and Mirvac Group on the topic of M&A as the pair handed down results yesterday; all anyone could think about was Australand. Some analysts have questioned whether Alumina moved too early with CITIC, but with the stock down for so long shareholders might not be so patient. Elsewhere, Macmahon has received a Sembawang Australia proposal that it can actually work with, PrimeAg Australia could have a sell-down deal on the go and the market’s second consecutive close above 5000 points has the IPO speculation bubbling even more.

GPT Group, Mirvac Group, Australand

The results from GPT Group and Mirvac Group provided watchers of the Australian real estate investment trust sector with a compelling glimpse at the deal-making that could be on the horizon.

GPT Group more than doubled its net profit for the year to December 31, to $594.5 million from $246.2 million, with chief executive Michael Cameron declaring that a deal with Australand is still in the works.

"We are committed to advancing a proposal that’s going to be in the best interest of Australand and GPT security holders,” said Cameron, who must have a register of happy shareholders – the stock is up 24.3 per cent over the last 12 months.

Australand – majority owned by Singapore’s CapitaLand – knocked back a proposal from GPT for its commercial, industrial and investment property business, with managing director Bob Johnston later playing down the prospect of a deal when he revealed his own solid set of numbers.

"We’re a quality business. You can see from the result we continue to show significant improvement,” said Johnston a week ago.

But CapitaLand has put its stake up for review and GPT remains committed to a deal. This play is far from done.

Meanwhile, over at Mirvac Group things weren’t so rosy with development project writedowns dragging the company’s profit down by more than two thirds. Shareholders won’t be overly disappointed, the stock is still up 28 per cent over the last 12 months.

New Mirvac chief executive Susan Lloyd-Hurwitz refused to rule out a rival proposal for Australand, which the group has reportedly been considering, and gave the overall impression that she’s out to buy.

The phrases "the whole sector is in play” and "we don’t rule anything in or out” were used in a handful of interviews.

Alumina, CITIC

Analysts have begun to question the timing of Alumina’s $452 million placement to Chinese state-owned CITIC because of improving fundamentals in the alumina market.

Shareholders might beg to differ that the timing couldn’t have come earlier, given that the stock is down 72 per cent from five years ago.

Either way, the 13 per cent placement to CITIC, which has already been approved by Treasurer Wayne Swan and China’s all important National Development and Reform Commission, sets up an interesting dynamic between the new shareholder and the giant once seen as Alumina’s only change of control agent, Alcoa.

Alumina, which is a 40 per cent partner in the AWAC global alumina alliance with Alcoa, surged 7.5 per cent during yesterday’s session to finish at $1.29, a noticeable premium to the $1.235 a share the placement was priced at.

Given Alcoa’s obvious influence over the company, it’s not as if CITIC is going to be able to pinch the company from under the American’s nose. But the 13 per cent stake presents a potential blocking hurdle that Alcoa would have to overcome should it decide it wants to mop Alumina up.

This column isn’t suggesting that this is in Alcoa’s thinking, although as the analysts point out the Alumina market is improving.

It’s just a big change to a register that was, until yesterday, synonymous with only one resources giant.

Macmahon Holdings, Sembawang Australia, Leighton Holdings

Mining services company Macmahon Holdings has received yet another proposal from Sembawang Australia for its construction assets, but this time they might be able to take the suitor seriously.

Macmahon released a brief letter from Sembawang detailing its offer at $35 million, which is superior to the $25 million offer from major shareholder Leighton Holdings.

The new offer is slightly lower than the original $38 million proposal, but it’s unconditional, with the exception of a formal sale and purchase agreement with Macmahon.

"The board is considering the proposal and will continue to keep the market informed in accordance with all legal and regulatory requirements,” Macmahon said in a statement.

It’s an offer they should consider. While Sembawang let themselves down badly earlier this year with some poorly timed rival proposals that were nothing short of bizarre, this is one Macmahon simply has to have a look at.

Macmahon shares were up 3 per cent by the end of the session.

The news brings into serious doubt whether the meeting set for February 26, where Macmahon shareholders are set to vote on the Leighton deal, can go ahead.

PrimeAg Australia

PrimeAg Australia chairman Roger Corbett could be on the verge of reporting some progress in his efforts better realise the value of the company by selling it down bit by bit.

The Australian Financial Review reports that PrimeAg is ready to offload 60 per cent of its land and water portfolio to US asset manager TIAA-CREF Investment Management.

The company’s assets were last pencilled in at $420 million, but its market cap is currently hovering around $320 million.

Wrapping up

With the benchmark ASX200 index closing above 5000 points for a second consecutive session for the first time since September 2008, the growing sense of optimism for a return of IPOs is only getting stronger.

The Australian reports that fund managers have cautiously backed Inghams Enterprises to float its chicken business (something the company hasn’t confirmed publicly).

Downer EDI has collected a $94 million contract with NBN Co to roll out that fibre optic cable to homes in New South Wales.

The deal is one of many NBN Co hopes to sign in coming months as it attempts to speed up the rollout of the network.

And finally, staying with telecommunications, Optus is dumping retail distributors Telechoice and Allphones as part of a broader strategy to lift its brand image.


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