BREAKFAST DEALS: BHP's general grilling
BHP Billiton
BHP Billiton's shareholders will have a list of questions for the mining giant's boss Marius Kloppers at the upcoming annual general meeting with the issue of a share buyback expected to be foremost on their mind. Talks of a multibillion dollar buyback picked up steam after the miner's $40 billion tilt at Canada's Potash Corporation of Saskatchewan (PotashCorp) ran into trouble with the Canadian government and with BHP widely expected to walk away from the deal, shareholders will be eager to find out what Kloppers intends to do next. The PotashCorp bid may have fallen by the wayside but it hasn't taken long for the market to start running the numbers on a potential deal between BHP and Woodside Petroleum after the Perth-based energy company's major shareholder Royal Dutch Shell offloaded a significant stake in Woodside last week. While talks of an imminent bid by BHP seem a bit premature there is little doubt that the miner's next acquisition will come in the oil and gas sector. However, any potential transaction could well be made in the Gulf of Mexico rather than in Australia, especially after Kloppers said in July that BHP could spend as much as $20 billion to buy assets in the region. BHP's recent track record with heavyweight acquisitions has been less than stellar and while it may be a little unfair to pin the blame on Kloppers the miner's shareholders will no doubt be quick to point out that after three successive failures now might be a good time to resume the share buyback that was stalled in 2007, when BHP launched its failed takeover proposal for Rio Tinto. Of course the PotashCorp bid isn't officially dead, BHP has until December 3 to try and change Ottawa's mind and reports suggest that Kloppers may not pronounce the last rites on the deal this Tuesday. Speaking of PotashCorp, it looks like Prime Minister Julia Gillard and her Canadian counterpart Stephen Harper had an informal tte--tte about the bid at the sidelines of the G20 summit. Gillard reportedly raised the issue after talks in some quarters that business relations between the two countries may become strained in the aftermath of Harper's shock rejection of BHP's bid. GHarper is reportedly set to soon reveal what kind of foreign investment his government is willing to green light and Gillard could do well to take notes on knotty takeovers and national interest given that Canberra faces some investment tests of its own with regards to the mooted merger between the ASX and the Singapore Exchange and a possible play for Woodside.
* BHP Billiton has moved this morning to pre-empt any pressure from its shareholders for a share buyback, with the mining giant telling the market that it has withdrawn its offer for PotashCorp and will reactivate the remaining $US4.2 billion component of its suspended $US13 billion buy-back program. The move should take some pressure off BHP boss Marius Kloppers ahead of tomorrow's AGM but with the share buyback now back in the picture attention will now most likely focus on whether Kloppers is still game enough to pursue growth through acquisitions.
NSW power privatisation
With the Queensland state government hogging the headlines with the upcoming float of QR National and the recently completed sale of Port of Brisbane, it's time for the New South Wales government to shine today as the final bids for the state's multibillion-dollar power sell-off look set to come in today. It's been a long and torturous two years for the $8 billion privatisation process to get to this point and the NSW government hasn't done anyone any favours with its decision to add key information – taxation advice from the ATO, hedging contracts between retail and gen-traders and details on other new contacts – to the data room at the last minute ahead of today's 3pm deadline. Earlier, The Weekend Australian reported that the tax office had dealt the privatisation plans a crucial blow after ruling that upfront payments on the four gen-trader assets – through which electricity trading rights of state-owned power stations will be contracted to private companies – were not tax-deductible. True to form the Keneally government waited till the last minute to inform the potential suitors about the ruling and the paper reckons that the taxman's decision could wipe $500 million from the final sale price. The tardy disclosure would have no doubt angered some participants putting the final polish on their bids, however, its final impact on the process and sale price might not be known for some time. Speaking of the suitors, The Australian Financial Review reports that there are less than seven bidders for the gen-trader contracts, with Origin Energy, AGL Energy, TRUenergy and private equity firm TPG and Blackstone also in the mix. The $8 billion privatisation plan also includes the sale of three energy retailers – Energy Australia, Integral Energy and Country Australia – with AGL, Origin, TRU Energy and UK's International Power the interested parties.
OneSteel
OneSteel has scored a major overseas win with the Sydney-based steelmaker snapping up global mining group Anglo American's steel grinding media unit for $US932 million. Anglo American said on Sunday that it was to sell the assets of its Scaw Metals business – Chile-based Moly-Cop and Canada-based AltaSteel – to OneSteel as part of its ongoing streamlining program. OneSteel reportedly beat out a handy set of rivals, including steel giant Arcelor Mittal, to the prize. The steel maker, which is not expected to raise extra equity to fund the purchase, was advised by Morgan Stanley, while Goldman Sachs advised AngloAmerican.
Perpetual, KKR
Wealth manager Perpetual's complicated dance with private equity suitor Kohlberg Kravis Roberts (KKR) is expected to play out in its own merry pace and after four weeks of negotiations the target is reportedly digging deep to squeeze out every drop of value of its business. According to the AFR, Perpetual got the ball rolling on additional analysis of the company's value soon after it rejected KKR's initial offer on October 25th. While Perpetual has left the door open for further talks with KKR, there is growing speculation that the wealth manager is looking for an alternative suitor to ramp up the competitive tension and it may not have to look far with reports that KKR's private equity rivals – TPG, CVC and Pacific Equity Partners – have all had a look at the business. Time will tell if any of that bunch is willing to go head to head with KKR's hefty $1.75 billion offer but for now KKR should manage to get limited due diligence soon with the AFR suggesting that the suitor may be looking to complete due diligence by Christmas.
Wrapping up
It looks like Leighton Holdings' outgoing CEO Wal King may get the last laugh over the local construction giant's German parent Hochtief which is fighting for its survival against Spain's ACS. ACS shareholders are set to decide on a monster equity issue of 157 million shares as it turns up the heat on Hochtief. Hochtief's appeals to Australian regulatory authorities to force ACS to make a full takeover bid for Leighton have so far fallen on deaf ears and once the equity issue is done and dusted ACS could use the extra firepower to muscle in on Hochtief. All of this could take place just around the time King hands over the keys to the kingdom to David Stewart and The Age points out that given ACS boss Florentino Perez's amiable connections with King, the veteran Leighton man could be up for a board seat at ACS and could well become one of the Spanish group's four representatives on the Leighton board in the near future. In the banking sector, the Australian Prudential Regulation Authority (APRA) has reportedly scuttled ANZ Banking Group's planned $1 billion hybrid capital issue. According to the AFR, APRA shot down the plan after raising concerns about the level of equity credit in the hybrid's structure. Elsewhere, Goodman Fielder and Cargill Australia have terminated their deal over Goodman's edible fats and oils business, after failing to gain the competition regulator's approval. Goodman Fielder told the market on Friday that despite making further submissions, the Australian Competition and Consumer Commission (ACCC) was still opposed to Cargill's $240 million purchase of the unit. Meanwhile, Goodman Fielder has also lost the head of its home ingredients business, Geoff Erby, to consumer foods company Manassen Group. In overseas news, hedge fund guru and the founder of Harbinger Capital Partners, Phil Falcone, is under fire over possible misconduct with the US Securities and Exchange Commission (SEC) and the US attorney's office reportedly investigating if Harbinger gave Falcone and other prominent clients preferential treatment over a $US113 million loan. Elsewhere, Newsweek and the news website Daily Beast are now wedded in holy matrimony in the words of Daily Beast editor-in–chief and prominent UK journalist Tina Brown. Brown made the comments over the weekend as she announced the deal that will see the two publications combined into a venture called the Newsweek Daily Beast Company. Newsweekhas been without an editor since its owner, stereo magnate Sidney Harman, bought the magazine from The Washington Post Co for a token cash price of $1 in a deal that closed in September.
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