BREAKFAST DEALS: Hastings haze

Strange alliances emerge in the battle for Hastings' Australian gas pipelines, while TRUenergy's float looks on track.

An apparent bidding war for gas pipeline company Hastings Diversified Utilities Fund involving a Canadian fund manager speaks volumes about Australia’s gas potential and Canada’s desire for our infrastructure assets. However, there’s more to this deal. Meanwhile, PacBrands has all but ruled out a deal with Kohlberg Kravis Roberts after months of glacial-pace talks. Elsewhere, TRUenergy’s books look good (good enough for a float, some might argue), Northern Iron says its Indian suitor has come up short and Mirabela is battening down the hatches for another nickel market pounding.

Hastings Diversified Utilities Fund, APA Group

At first glance it looked like Australian gas pipeline player Hastings Diversified Utilities Fund (HDF), managed by Hastings Funds Management, had this year’s first headliner bidding war on its hands. Canada’s Caisse de dpot et placement du Qubec – try saying that three times fast – has teamed up with Australia’s Utilities Trust of Australia to lob a $2.30 cash a share proposal. The offer is indicative, non-binding and conditional.

However, it’s all cash and at $2.30 per share clearly superior to the current $2.10 cash-and-scrip offer from APA Group. The new pair, who go by the name Pipeline Partners Australia, have also got around APA’s 21.14 per cent stake in the target by making it only conditional on achieving 70 per cent acceptance.

The share price responded positively, jumping 12.8 per cent to $2.38 as speculators salivated over a bidding war. The thing is Hastings Funds Management also manages Utilities Trust of Australia. This raises questions about the seriousness of this proposal and the amount that APA would have to increase its bid to win the target’s board over.

Pacific Brands, Kohlberg Kravis Roberts

The question on the lips of Pacific Brands shareholders is whether there’s another company out there that would be happy to take the company over. Discussions between PacBrands and private equity firm Kohlberg Kravis Roberts were outed earlier this year and the clothing company acknowledged some other unsolicited proposals from elsewhere in mid-February. However, yesterday the clothing company told the market that its board "has concluded that a definitive proposal for the acquisition of the entire issued capital of the company is unlikely to be forthcoming in the near term”. Translation: KKR has either walked away or moved at snail’s pace, and there are no other seriously interested parties.

Business Spectator’s Stephen Bartholomeusz argues that interpreting this news as a sign that KKR saw some signals they didn’t like is too simplistic. PacBrands has made some big progress towards creating a sustainable business and there mightn’t be much left for the former target to do to extract value.

The speculators have been winding back their positions over recent weeks and months, so the share price didn’t have much further to fall. With just a 5.7 per cent slide, PacBrands shares are just about where they were before the KKR offer story broke. Given that other retailers like JB Hi-Fi and Harvey Norman have lost significant ground over the same period, it’s reasonable to say that PacBrands shares might be trading a little higher than they otherwise would have had the KKR bid not emerged. Ergo, there are a few investors out there who think the company remains a target, or dropped the ball by not watching the retail sector.

TRUenergy, CLP Holdings

CLP Holdings has unloaded a set of numbers that should reassure the market there won't be a repeat of the Genworth Financial float reversal. In a statement to the Hong Kong stock exchange, CLP revealed that TRUenergy had enjoyed a 51 per cent surge in first quarter earnings. While this can be put down largely to the $2 billion acquisition of EnergyAustralia from the NSW government, it speaks well towards the proposed float of a large chunk of TRUenergy later this year.

Investors looking for an IPO litmus test will be heartened by the numbers, especially after Genworth delayed its proposed float of 40 per cent of its Australian arm due to a sudden deterioration in performance.

Northern Iron, Aditya Birla Group

Northern Iron has put prospective suitors on notice that they’ll need more than $477 million. Northern told the market yesterday that it has rejected an offer from India’s Aditya Birla Group, worth between $1.23 and $1.29 a share, along with the predator’s request for a two-stage due diligence.

Northern had a tense encounter with Aditya last week when it acknowledged reports from India, one quoting an unnamed Aditya executive, indicating that a takeover proposal of $500 million was being discussed. Northern said it was "disappointed” that confidentially had appeared to have been broken, which is code for "they broke confidentiality”. And further, Northern said there was "no foundation” for the $500 million valuation being tossed around. In Australian dollar terms the bid would have been worth $477 million.

Mirabela Nickel

Mirabela Nickel is preparing for another bumpy year in its sector with a $120 million capital raising being sought for shelter. Mirabela has launched a $100 million non-renounceable rights issue at 30 cents a share, which is a 13 per cent discount to the share price, having last traded at 34 cents. Mirabela shares have already fallen a massive 66 per cent in the last three months. Resources Capital Fund will also provide another $20 million, with the option of putting in another $20 million in the future.

The raising is sizable given that Mirabela’s market cap is sitting at $167 million, which will presumably drop when the shares start trading again in the wake of the capital raising. But the company needs to protect itself from the tumultuous movements of nickel. The benchmark nickel price is down 41 per cent since February 2011 and weaker players are being taken down by the volatility.

Wrapping up

It turns out that timber company Gunns did in fact sell its Heyfield hardwood sawn timber business, as was reported, and it did in fact go for $28 million. However, as has been the case for a while, Gunns is still in a trading halt and no closer to sealing its all-important capital restructure.

In media, billionaire Gina Rinehart is trying to make her stake in Fairfax Media work a bit harder, with The Australian reporting that she’s pushing again for two board seats. The newspaper says Rinehart has moved on from pressuring the board to give her a seat – they and chairman Roger Corbett don’t like the idea – and on to major shareholder Orbis Australia.

And finally, the same newspaper also reports that Beach Energy has closed down the data room for anyone interested in its shale gas assets. Chairman Bob Kennedy says the process was started too early and anyone interested in buying in will have to wait until it has really proved its potential in the Cooper Basin.

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