BREAKFAST DEALS: Billabong bounce

Billabong nearly doubles its market capitalisation on news talks with suitors are advancing, while Sundance changes tack on Mbalam.

Billabong International had a good session yesterday on the back of news that its talks with refinanciers are progressing, despite reports that a lender has taken a haircut and bolted. Fellow long-term sufferer Sundance Resources is talking about splitting the Mbalam contract up to make deals smaller and easier to make. Elsewhere, Perpetual’s share price plunge has killed its lead on Equity Trustees, Commonwealth Bank has played a straight bat to speculation about its property holdings and Linc Energy was left a little bemused by the idea that it’s been speaking to BHP Billiton about Queensland coal.

Billabong International

Billabong International shares finished yesterday’s session almost twice as strong as they started on the back of an announcement that refinancing and asset sale discussions with its former suitors were “well advanced”.

Given that it was over six months ago that the embattled surfwear company received its first proposal from the Sycamore Partners consortium, which was later followed by a rival proposal from Altamont Capital Partners, it’s not a moment too soon.

Billabong shares ended up 46.2 per cent higher at 19 cents a share, giving it a market cap of $91 million. That’s a long way short of the 60 cents that Sycamore and Altamont kind of put on the table, after earlier indicating that they’d shape an offer around $1.10 a share.

But it’s a solid gain nonetheless.

Worryingly though, it was earlier reported that one of Billabong’s lenders has sold $20 million in Billabong’s $200 million debt pile on the secondary markets for a 20 per cent discount. Not entirely inspiring stuff.

Sundance Resources

Sundance Resources, which like Billabong also once suffered from chronic takeover syndrome, is reportedly pursuing a new strategy to get its African Mbalam iron ore project.

According to The Australian, chief executive Giulio Casello says Sundance still looking for partners to develop the project that straddles the borders of Cameroon and the Republic of Congo.

But Sundance is looking to split the port and rail infrastructure from the mine construction contract.

“There are not that many players for a straight joint venture and there are a heap more interested in the separate infrastructure and mine solution,” Casello said, according to the newspaper.

Sundance’s shares are in the doldrums at the moment. At 7 cents a piece the iron ore hopeful has a market cap of just $214 million, which compares to the $1.3 billion that former Chinese suitor Hanlong Mining was offering before it all fell apart.

The Trust Company, Perpetual, Equity Trustees

Perpetual was absolutely smashed during yesterday’s session to the tune of 8.9 per cent. The result of this is Perpetual shareholders will be absolutely disappointed and Equity Trust shareholders will be absolutely thrilled.

Perpetual’s share price has now fallen 20 per cent since it joined the race for financial trustee The Trust Company.

Rival bidder ET has also copped an 8 per cent slide since its offer was announced. But with ET bumping up the equity component of its offer last week, Perpetual’s Tuesday plunge means ET’s bid is now worth more for the first time. 

It wasn’t a down market either. The ASX200 finished flat.

On current share price values, ET is sitting at $5.63 and Perpetual’s offer is worth $5.36.

This balance that TTC has to strike harks back to the pre-GFC days when cash wasn’t king. You’d have to watch the share price of the suitor to figure out what the hell they were actually offering you. What a time to be alive.

This Perpetual slip put TTC in a bad spot. The board, quite reasonably, recommended that shareholders accept the Perpetual bid and declined to give ET due diligence when there was a big premium up for grabs.

So should it now open the doors to ET on the back of a single day’s trading?

It’s too early to call it now. But what makes the situation more difficult is that both offers are now lower than the value range recommended by independent expert Lonergan Edwards of $6.03 to $6.29.

Commonwealth Bank of Australia

Commonwealth Bank of Australia’s listed property funds issued some pretty flat denials to speculation that the bank has put them in play following the appointment of Goldman Sachs and UBS to review the businesses.

Management for CFS Retail and Commonwealth Property Office Fund said yesterday that no approaches had been made that would support speculation over the last week about a change of ownership.

The funds are part of the Commonwealth Bank subsidiary Colonial First State Global Asset Management.

While a sale mightn’t be on the table, the business is being reviewed. So something is happening. We just don’t know what yet.

Linc Energy, BHP Billiton

Not to be outdone by Commonwealth Bank’s denial, Linc Energy issued a statement late in the piece yesterday that couldn’t have been further from the line of media speculation.

Earlier it was reported that Linc was in early talks to purchase a Queensland coal mine currently owned by BHP Billiton and Japan’s Mitsubishi.

While it wouldn’t be unusual for BHP to be selling an unwanted coking coal asset, Linc made it clear that it would be unusual for it to be the buyer.

“Linc Energy is focused on developing its core business of oil production and commercialisation of UCG (underground coal gasification) on a global scale,” said Linc chief Peter Bond.

“As such, Linc Energy is committed to divesting its coal division, and it actively pursuing a course to achieve this.”

As the big miners have demonstrated, selling assets in this environment is mighty hard. Rio Tinto is still stuck with diamond and aluminium.

Wrapping up

The aftermath of the iSelect float (which slumped another 2.2 per cent yesterday) threw up many questions about the health of the Australian IPO industry.

The Australian Financial Review reports that insurance broker Steadfast Group, chaired by legendary Frank O’Halloran, is expected to lodge its offer documents with the corporate regulator in the coming fortnight.

Goodman Fielder has signed a crucial renegotiation with Coles over its private label bread contract, which is expected to take some of the string out of the bread price war and help the food company.

Meanwhile in construction, Leighton Holdings subsidiaries have taken 75 per cent of the business for the New South Wales government’s contract to build tunnels and excavate new underground stations for Sydney’s North West Rail Link.

The $1.15 billion contract has been split between Leighton vehicles Thiess (50 per cent) and John Holland (25 per cent), and Dragados (25 per cent).

In telecommunications, The Australian Financial Review understands that private equity firm TPG Capital was involved in two separate first round bids for Optus’ $2 billion satellite business.

And finally, Telstra Corporation has coughed up $US18.3 million ($19.8 million) for a minority stake in US-based software and app developer Kony Solutions.

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