BREAKFAST DEALS: Dulux paint ball

Dulux and Alesco fire at each other via the Takeovers Panel, while Goodman Group spends big on Chinese expansion.

The Takeovers Panel hasn’t yet given us definitive word on whether it will give a ruling on the Alesco Corporation-DuluxGroup fiasco. It would really help, but the two companies have done enough to ensure no one else goes down this road. Meanwhile, Goodman Group is still benefiting from the rise of China with a logistics deal, as Fortescue Metals Group tries to restore belief in Beijing’s demand for iron ore. Elsewhere, GrainCorp has got its institutional offer away with just a small shortfall, while Telstra has done its dash with the TradingPost.

Alesco Corporation, DuluxGroup

As expected, the Takeovers Panel released the details of the submission from Alesco Corporation in relation to its discussions with suitor DuluxGroup. But the Panel has given no indication on whether it will conduct proceedings.

The two have been locked in an increasingly hostile and public battle over the details of a potentially enhanced franking credit deal for the target’s shareholders as part of Dulux’s $210 million offer. The superior "proposal” emerged during talks after Dulux had declared its $2.05 bid and 42 cents dividend "best and final”.

According to the Panel, Alesco contends that Dulux’s statement on August 28, where it effectively marked the end of talks about a superior 75 cents dividend deal, misrepresented its support of a 42 cents proposal as a "key outstanding issue” between the two companies.

More importantly, Alesco has sought a "final order” to clarify whether the Australian Securities and Investments Commission’s (ASIC) truth in takeovers principles should apply to the franking credits.

It might be worthwhile for the Panel to spend some time on this matter.

Dulux said it would be happy to speak to the Panel about the franking credit question on the proviso that Alesco pledge its unanimous support for the offer if the response from the regulator was not favourable.

Make of that what you will. The crucial thing for shareholders in either company is whether the Panel believes that their discussions about enhancing the franking credit balance after the offer was declared "best and final” was a complete waste of time.

Shareholders are entitled to know that, hopefully the Panel can enlighten them.

Regardless, the calamity of this encounter will probably serve as a warning to other companies who think about trying to overcome an impasse by negotiating a franking credits deal after a takeover is declared final.

It just seems to make things worse.

Goodman Group, Canadian Pension Plan Investment Board, Goodman China Logistics

Property developer and manager Goodman Group has helped give a little context to the idea of a slowdown in China.

While mineral prices are going through the floor for reasons outside just deteriorating demand – as explained in this morning’s edition of The Distillery – Goodman has watched another $US500 million pumped into its China joint venture, Goodman China Logistics.

The Canadian Pension Plan Investment Board did the bulk of the work, throwing in $US400 million, doubling its existing investment for the second time. Goodman did the rest.

The investment brings the total equity in Goodman China Logistics, started up in 2009 to take advantage of China’s growth, to $US1 billion.

The fund has investments in 12 logistics projects in six Chinese cities.

Goodman chief executive Greg Goodman said an undersupply in logistics sites in the emerging economic superpower would continue to support demand for its facilities.

Fortescue Metals Group

As Fortescue Metals Group founder Andrew Forrest forks out $39 million on the iron ore miner’s stock within two days, chief executive Nev Power says the company is open to a strategic partnership on its Northstar magnetite project.

According to The Australian, Power revealed the plans to reporters after his address to the Sydney Mining Club.

"For Northstar, we have been holding discussions with a number of parties to bringing them in to help fund it,” he said. No further details were provided.

Northstar is controlled by a Fortescue joint venture with Baosteel, called FMG Ironbridge, which was announced in mid-June. This deal strengthened speculation that Fortescue would look to list the vehicle on the Hong Kong Stock Exchange.

Yesterday another change in director interest notice hit the ASX indicating that Forrest has spent $39 million in two days to either take advantage of the miner’s slumping share price, or add some support to the stock.

GrainCorp, Gardner Smith, Integro Foods

GrainCorp shares will resume trading today (Friday) after the company completed the $103 million institutional component of its $159 million capital raising.

According to The Australian Financial Review, underwriter Credit Suisse had to cover a shortfall of around 1.2 million shares, which were offered to institutions at $8.80 a share in the wake of GrainCorp’s acquisition of Gardner Smith and Goodman Fielder’s Integro Foods.

The newspaper says there’s some ongoing uncertainty surrounding the acquisition of Gardner Smith because it went through at 9 times EBITDA, which looked a bit expensive.

The flip side is GrainCorp picked up Integro for about 5 times EBITDA and the average between the two eased the worries of many onlookers.

In the meantime, GrainCorp moves on to retail shareholders, who will get a look at $56 million in new shares.

Telstra, TradingPost

Telstra Corporation has outsourced its struggling classifieds business, the TradingPost, to online advertiser CarSales.com, which will aggregate the business into its quicksales.com.au brand.

The move, flagged earlier this week by The Australian, draws to a close the telco’s brief foray into the advertising network market. It’s also another tentpole moment in the decline of the TradingPost since it was picked up by Telstra for $636 million in the early 2000s.

The rise of Google, eBay and the variety of specialised online traders, much like CarSales.com, has cruelled the TradingPost’s relevance and appeal. The telco has written down the value of the business significantly.

"This transaction will re-invigorate TradingPost.com.au and also bolster the operation of quicksales.com.au,” said CarSales.com chief executive Greg Roebuck.

Hopefully, when it comes to resuscitating an Australian icon, Roebuck is doing more than just dreaming.

Wrapping up

Orica chief executive Ian Smith is believed to be coming under pressure to divest the explosive makers mining consumables business Minova, according to The Australian Financial Review.

Smith has previously said that he wants to keep the division.

Seven Group Holdings chairman Kerry Stokes has denied media reports that he’s glanced at Fairfax Media with an eye to buying into the embattled company.

The denial seems comical, given that Stokes has made it abundantly clear that his chief focus is Consolidated Media Holdings and whether the Australian Competition and Consumer Commission (ACCC) has a problem with the billionaire owning more of it.

And finally, in a similar spirit, Private Equity Partners has refuted reports that it underestimated the cost of running recent purchase Spotless Group and was forced to find an extra $100 million to fill the hole.

"As per the information given to The Australian Financial Review yesterday, PEP is pleased to have closed the Spotless deal last week and is fully satisfied and very comfortable with the funding structure and financing agreements it has in place,” the company said in a statement.

"There has been no major deviation from our expectations and no change in equity commitments.”

Related Articles