BREAKFAST DEALS: Gunning for Greens

Whitehaven and Aston chiefs hit the road to sell their Boardwalk proposal, while Gunns see green on Chandler backdown.

Coal deals are difficult to bed down and the chief executives of Whitehaven Coal and Aston Resources might be keen to remind shareholders of this fact during their upcoming roadshow to sell the $5.1 billion proposal. The capital set aside to get Boardwalk Resources is a bit much, according to independent expert PricewaterhouseCoopers, but Whitehaven and Aston still see enough value in the overall deal. Meanwhile, Gunns is blaming the Greens for the collapse of an investment proposal from New Zealand billionaire Richard Chandler. Elsewhere, Qantas Airways boss Alan Joyce will be racking his brain for another Asian strategy, the battle for Ludowici is back in the open after a favourable ruling – depending on what side you’re on – from the Takeovers Panel and James Packer is still trading blows with Echo Entertainment boss John Story.

Whitehaven Coal, Aston Resources, Boardwalk Resources

The chief executives of Whitehaven Coal and Aston Resources will spend the next two weeks travelling the world attempting to convince shareholders that the $5.1 billion merger agreement is a good idea, despite the drastically overvalued Boardwalk Resources component. Late last week, independent expert PricewaterhouseCoopers said the $491 million deal for Nathan Tinkler’s Boardwalk was way overvalued – they put it between $200 million and $330 million.

Whitehaven directors nonetheless recommend the deal as value accretive because they expect it will generate up to $680 million in synergies. Yes, the two companies have to overpay for Boardwalk, but with Tinkler holding 38 per cent of Aston the companies have little choice. Mergers almost always have comparative winners and losers, but that doesn’t mean everyone can’t win a little.

Gunns, Richard Chandler Corporation

Timber company Gunns is blaming the Greens and environmentalists in general for the collapse of a planned investment from New Zealand billionaire Richard Chandler. Gunns went into a trading halt on Friday after the Singapore-based Richard Chandler Corporation decided against investing $150 million in Gunns as part of a $280 million capital raising that would have delivered the billionaire a cornerstone stake. After due diligence however, Chandler has decided against the idea.

In the meantime, managing director Greg L’Estrange is looking for alternative equity investors and blaming environmentalists for an ‘anti development’ campaign. He even linked the plight of Gunns to recent revelations that environmentalists are targeting the coal industry. While Gunns has struggled with PR when it comes to the long-talked about and still-to-be-realised $2.5 billion Bell Bay pulp mill, it’s puzzling to find that Richard Chandler had to look at the company books to discover that environmentalists really don’t want it to happen.

Qantas Airways, Malaysia Airlines

Qantas Airways chief executive Alan Joyce will have to find another way to make the carrier’s international business profitable. Last week, Qantas officially put an end to talks with Malaysia Airlines over an ultra-premium Asian airline because of disagreements over the commercial terms. Due to the plans of Singapore Airlines and likely requirements for big capital, a deal for Kuala Lumpur is out of the question as well.

Shares in the airline dipped 3 per cent as investors started assessing the short list of compelling leads that Qantas has, given that it has minimal cash to allocate. Joyce said Asia remains a priority and continues to "explore opportunities in the region, including joint ventures and alliances”.

Ludowici, FLSmidth, Weir Group

Ludowici shareholders have got their wish after the Takeovers Panel ruled against an appeal by suitor Weir Group to prevent rival bidder FLSmidth from lodging its higher offer. The UK-listed firm is considering its position now that the $11.00 a share takeover bid for Ludowici will stand.

Ludowici shares jumped 1.6 per cent to $11.30 – they were $3.50 before the takeover battle commenced – illustrating that some shareholders are holding out for a better offer from Weir. Currently, the Scots have put $10.00 on the table and hoped that the panel would rule in their favour.

Echo Entertainment, Crown

The rift between Echo Entertainment chairman John Story and Crown Limited billionaire James Packer is widening. Story has spoken to The Australian Financial Review of his displeasure at what he dubs Packer’s "covert means of attaining control” of Echo in order to secure its Sydney casino license.

In perhaps a sign of things to come, Story said he would "take a hard line and make a stand” against Packer, which probably means that cooperation on any change of control at the company is out of the question unless the gambling billionaire puts a takeover premium up.


PaperlinX has offloaded its Italian business Polyedra to European paper company Lecta for 45 million euros ($55 million) in an effort to reduce its debt burden amid growing shareholder frustration. PaperlinX announced the deal on Friday that will result in 13 paper mills existing its stable for more than 90 per cent of book value. Chief executive Toby Marchant said the "continued uncertainty of world paper markets” would compel the company to continue with its cost cutting program, while some shareholders wish for paper industry expert Andrew Price to take the position of chairman.

Goodman Fielder, Wilmar International

Goodman Fielder chairman Max Ould is marking his territory amid worrying protectionist tones from Nationals leader Warren Truss and independent MP Bob Katter. Singapore’s Wilmar International has built a 10 per cent stake in breadmaker Goodman Fielder and Ould told The Australian that we should welcome foreign investment because our capital markets aren’t sufficient on their own.

Rio Tinto, Orissa

The East Indian state of Orissa is yet to make a decision about a plan by Rio Tinto to invest $2 billion in a joint venture with Orissa Mining Corporation and NMDC. The state’s Steel and Mines Minister Raghunath Mohanty said the decision is still before an influential committee that will decide whether to allow Rio’s investment in this notoriously difficult development region. India’s steel production is tipped to grow 9 per cent over the next five years.

Wrapping up

Many Australian miners might still be scratching their heads about what to do in Indonesia with foreign ownership laws up for change, but Newcrest Mining is confident that when it comes to the Gosowong goldmine, it’s safe. Newcrest owns 82.5 per cent of Gosowong and the company believes that its stake won’t be impacted by the legislative changes. Still in resources, Glencore International has made a £3.5 billion ($5.49 billion) bid for Canadian grain handler Viterra, who you might remember picked up Australia’s ABB Grain.

Fosters Group, owned by SABMiller, is no longer the nation’s largest brewer after losing its contract to distribute and sell imported brew Corona, with the owner shifting alliances to rival Lion Nathan, which is owned by Japan’s Kirin Holdings. And finally, talks between Fairfax Media and News Limited over a potential joint printing and distribution proposal have broken down.

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