BREAKFAST DEALS: Golden getaway

Terry Peabody reportedly leaves Transpacific's register, while Aurizon's landmark BHP coal deal extends its vista.

Terry Peabody, once known as Australia’s ‘Golden Garbo’ as founder of Transpacific Industries, looks to have sold his stake. Now private equity player Warburg Pincus, which bailed Transpacific out in 2009, has a much greater command over the register. Aurizon (QR National) has done a megadeal with BHP Billiton and its partners in Queensland coal, much to the relief of Lance Hockridge. Meanwhile, Mark Carnegie and Tim Sims battle it out over the reputation of private equity, Telstra taps euros for its spectrum bid and Woodside’s partners could be hitting some trouble in Israel.

Terry Peabody, Transpacific Industries

Former billionaire Terry Peabody looks to have sold out of Transpacific Industries, the company he founded more than 20 years ago.

According to media reports, the former executive chairman has offloaded his 11.3 per cent stake in the company, which is worth around $160 million.

Transpacific shares are up 40 per cent since mid-November, well ahead of the benchmark index over the same period, which has improved 16.4 per cent.

The rally really got some legs after Transpacific reported its first half profit numbers of February 22, where the company revealed net profit had more than doubled, although from an admittedly low base of $16.5 million. Analysts were taken by the 42 per cent lift in net earnings.

For a man like Peabody, who stepped down as executive chairman in 2010, it’s a good time to get out.

But the relationship between Transpacific and its Canadian-born founder unmistakably soured in early January when Peabody sued the company he founded for $4.6 million for the way it conducted a capital raising in October 2011.

His grievance was with Transpacific’s decision to rebuff a last-minute rival proposal from Kohlberg Kravis Roberts to take a big stake in the company at 66 cents a share, 4 cents higher than the bookbuild eventually achieved.

Now, this looks like a silly spat with Transpacific shares closing yesterday’s session at 94.5 cents.

But Peabody would have said a few ‘coulda, shoulda, wouldas’ over the last few years, with the stock price having peaked around $14.50 back in April 2007 on the back of a $2.5 billion acquisition spree, only to crash with the rest of the market during the GFC and never really recover.

By 2009, Transpacific was forced into an $800 million bailout by private equity group Warburg Pincus. Major deals, like those booked in the heydays before the GFC, would have to be approved by the private equiteer.

To this day, Warburg Pincus remains the largest Transpacific shareholder with 33.9 per cent. But Peabody was gone as executive director a year after the deal.

One wonders what the private equity player might do, with the Transpacific founder and only major power-rival gone from the register.

Aurizon, BHP Billiton

Aurizon, formerly known as QR National, has inked a more than decade-long, performance-based coal haulage contract with mining giant BHP Billiton after more than 12 months of talks.

Chief executive Lance Hockridge was understandably chuffed yesterday because the 12-year contracts with BHP’s joint ventures, operated with Japan’s Mitsubishi and Mitsui, replace deals that expire in 2015-16 that account for about a third of Aurizon’s coal business and a quarter of its total haulage.

"This is the largest contestable haulage contract in the Australian coal market in a decade. It represents about a quarter of the entire Queensland coal haulage market," Hockridge said. The veteran executive added that this deal is indicative of Aurizon’s successful transition from the Queensland government-owned QR National to the private entity Aurizon.

It’s a big occasion for Hockridge and Aurizon generally.

The longer the talks dragged on with BHP, the more rumours surfaced that the mining giant was contemplating taking its business to Asciano, or even doing the haulage itself.

What a blow that would be for a company at the tail end of 2010; and perhaps a bad omen for superstitious IPO watchers, who know that QR was the last big ASX float the market swallowed appreciatively. The stock is up 43 per cent since then by the way.

Mark Carnegie, Tim Sims

Between the business pages of this morning’s national newspapers is a story of the battle for the reputation of private equity, which is taking place at the AVCJ Private Equity & Venture Forum in Sydney.

On the one hand you’ve got venture capitalist and activist investor Mark Carnegie in The Australian arguing that the industry is in "absolute crisis” because of substandard performance by its managers.

"The skew of returns in this industry is absolutely appalling,” he said to the forum.

Carnegie spoke out against the 1.5 to 2 per cent fees he claims are still being paid to the poorer managers, which is partly due to the fact that the best ones "consistently produce returns that are better than any other serious investment target”.

Meanwhile, The Australian Financial Review has picked up on comments from Pacific Equity Partners co-founder Tim Sims at the same conference, who does not believe the current stink around the industry – more measurably referred to by the newspaper as "reputational issues” – will impact the broader sector’s ability to raise funds.

According to the newspaper, Sims told the audience that he was looking forward to net internal rates of return of 50 per cent as he looks to raise an expected $3.5 billion, starting next week.

After nine months of whispers, Japanese brewing giant Asahi decided to sue PEP and fellow private equity firm Unitas last month over claims of "misleading and deceptive conduct” over the sale 2011 sale of Independent Liquor (New Zealand).

It should be pointed out that, on these points, the two men are addressing two slightly different issues. Carnegie is saying the poorer private equity firms are terribly overrated, while Sims is arguing that general suspicions about industry conduct won’t harm their ability to raise funds.

Either way, it’s about reputation.

At the same conference, Carlyle Group managing director Simon Moore said the private equity firm is hopeful of a good outcome to the review of equipment-lending company Coates Hire, which it co-owns with Seven Group. Though he said the review of the up to $3 billion business by Goldman Sachs is still in its early days, according to The Australian.

And while we’re on the US private equity superstar, the Carlyle and TPG Capital-owned Healthscope has doubled the size of its subordinated debt issue to $300 million from $150 million, according to The Australian Financial Review.

Telstra Corporation

The federal government has discovered where a big slice of the money for its upcoming mobile spectrum auction is coming from – Europe.

Telstra Corporation has raised more than €1 billion ($1.3 billion) in 10-year euro-denominated bonds, which it says will go towards the spectrum auction, along with funding general corporate purposes.

The benchmark issue comes with a 2.5 per cent coupon and matures in 2023.

The federal government is aiming to raise up to $3 billion from the spectrum sale, which is set to go down next month. It’s followed by a shutdown of the analogue television signal at the end of this year.

Speaking of telecommunications, The Australian Financial Review reports that NBN Co is set to take over the physical construction of the network in the Northern Territory following the poor performance of lead contractor Syntheo, a joint venture between Lend Lease and Service Stream.

Wrapping up

The worst performing gas exploration stock on the ASX in 2012, Senex Energy, has rallied 12 per cent amid speculation that it might become a takeover target.

The story comes from last week’s news that Chevron has agreed to invest as much as $349 million for a stake in Beach Energy’s Cooper Basin assets. Senex is a Cooper Basin neighbour.

Sticking with gas at home, Karoon Gas is considering its pre-emptive rights over a 20 per cent stake in its Browse Basin joint ventures with ConocoPhillips, which the US energy giant intends to offload to PetroChina.

Meanwhile, Woodside Petroleum could have hit some trouble in Israel with local media speculating that some of the Australian company's joint venture partners on the $US1.3 billion Leviathan gasfield, like Noble Energy and Delek Drilling, are being investigated by anti-trust regulators.

Staying international, but moving to property, Goodman Group has snapped up a $US450 million interest in the world’s largest logistics centre, based in Hong Kong. The deal was sealed between Goodman Hong Kong Logistics Fund and DP World, a container terminal giant.

And finally, homewares marketer McPherson’s is hoping to raise $24 million to fund its acquisition of a majority stake in appliance importer and distributor Home Appliances.

Want access to our latest research and new buy ideas?

Start a free 15 day trial and gain access to our research, recommendations and market-beating model portfolios.

Sign up for free

Related Articles