BREAKFAST DEALS: Hastings verdict

The ACCC is set to deliver its decision on APA's bid for Hastings, while an IPO could be on the cards in the form of McAleese Transport.

Investors in Hastings Diversified Utilities Fund will be hoping for some clarity today, as the competition regulator prepares to hand down its ruling on the second of two competing takeover bids for the natural-gas pipeline owner – although it's not the one independent directors are backing. Meanwhile, McAleese goes to market, Macquarie strengthens its Wall Street deals team, and the Queensland government considers extending BHP Billiton's Olympic Dam deadline.

APA Group, Hastings Diversified Utilities Fund, Pipeline Partners Australia

The Australian Competition and Consumer Commission is poised to turn up the heat in the simmering battle for control of Hastings Diversified Utilities Fund, as the regulator prepares to rule today on APA Group's $1.12 billion takeover bid.

APA, which is offering 0.326 of its own shares and 50 cents in cash, is competing against Pipeline Partners Australia, which emerged in May with a rival $1.25 billion all-cash offer for the liquefied-gas pipeline owner (that's $2.35 a share).

While PPA, a joint venture between HDF’s manager Hastings Funds Management and Canada’s Caisse de dpot et placement du Qubec, already has the blessing of regulators and its HDF's independent directors, its bid is far from certain. And today's decision by the ACCC could complicate things further.

For starters, a major HDF shareholder, Australian Foundation Investment Company, has taken issue with a perceived conflict of interest between Utilities Trust’s role as manager, where it collects performance fees, and as bidder. It also argues that the recommended offer is too low and could have been better handled by the target.

Given the 70 per cent acceptance condition that PPA has placed in its bid, AFIC could become a major headache if it starts drumming up more discontent on the register.

For the ACCC's part, there is also speculation APA could lift its bid if it wins regulatory approval.

Over to you, Rod Sims.


McAleese Transport appears to be preparing to test Australia's IPO waters, after Credit Suisse reportedly hosted group presentations for the mining services business in Sydney this week.

It's still very early days, but the Queensland heavy-haulage company, set up by Mark Rowsthorn and some former colleagues from Asciano, plans to list in September, according to The Australian Financial Review. There's no word on the total value of the float yet.

Institutions were said to be impressed by McAleese's healthy earnings before interest and tax margins – reportedly around 20 per cent – although there were concerns about the company's leverage, plus management's ability to bring together the core McAleese business with a recent string of bolt-on acquisitions. Rowsthorn is understood to be assembling a board now.

Credit Suisse and JP Morgan are running float, and Freehills is compiling the prospectus. It's bound to be closely watched.

BHP Billiton

The South Australian government appears to be getting worried about being abandoned by BHP Billiton, amid doubts that the miner will push on with a $20 billion-plus expansion of its Olympic Dam mine in the state.

South Australian Minister for Mineral Resources Tom Koutsantonis now says he may be willing to extent BHP's end-of-the-year deadline for approving the copper-gold-uranium mine if there is a significant deterioration in global economic conditions, according to The Australian Financial Review. The indenture agreement was signed in 2011, setting the royalty rate BHP will pay on production from the mine for a 45-year period.

Koutsantonis' comments came as BHP released its production figures for the June quarter which, despite touting record iron ore output, failed to keep the miner's share price from tumbling to three-year lows. Investors – and perhaps also state governments – and increasingly worried about weakening global demand for commodities.

There were also concerns that slower shale oil production growth would result in multi-billion writedowns on its $20 billion launch into the sector last year.

Given both these risks, there was nothing in yesterday's report to suggest that BHP chief Marius Kloppers would change his view that the company needs to remain financially flexible.

Macquarie Group

Macquarie Group has beefed up its US deals team by installing a well-regarded investment banker as a senior manager and US head of Mergers and Acquisitions.

James "Jim" Frawley, who previously ran M&A at FBR & Co's New York investment banking office, will join Macquarie in September. He has an MBA from Columbia Business School and his resume also includes stints at Legacy Partners Group, Credit Suisse First Boston, The Bridgeford Group and The Beacon Group.

"Jim’s deep M&A expertise complement our already strong product offerings and will further help us to deliver holistic and customised solutions to our clients,” said Rob Redmond, US Head of Macquarie Capital, the firm’s corporate finance group.

Macquarie, which only commands a tiny slice of the $US1 trillion M&A market, has no great ambitions to take on Wall Street titans such as Goldman Sachs and JP Morgan, according to The Australian Financial Review. Instead, it is content carving out niches in the areas it knows best: infrastructure, financial institutions, natural resources, industrial, telecommunications, media and entertainment, and real estate.

Wrapping up

Following months of secret negotiations, Gerard Lighting Group has been sold to Champ Private Equity in a $1.05-a-share deal that values the company at $186 million. Gerard Lighting's largest and second-largest shareholders, the Gerard family and KT Asset Management, respectively, accepted the offer yesterday.

Gerard Lighting, which sold at a 52 per cent premium to the stock's one-month volume-weighted average price, was advised by Winter & Slatery. Champ worked with Gilbert Tobin.

Meanwhile, the Future Fund-backed Campbell Group and US-based Hancock Natural Resources Group are expected to be last remaining final bidders for South Australia's $700 million forestry assets, as the July 31 deadline quickly approaches, according to The Australian Financial Review. Other contenders, including Global Forest Partners and Canada's Brookfield Asset Management are understood to be reconsidering their positions.

UBS is said to be advising the South Australian government.

The same newspaper relays speculation that a buyer might be building a stake in Alesco, after more than a million of the company's shares traded hands yesterday. The stock rose about the $2-a-share bid from DuluxGroup for the first time since June 20, closing at $2.05.

On Friday, Dulux waived a number of conditions and extended its $188 million offer for Alesco after winning about 10 per cent more acceptances. However, the suitor has not made public any further increases in its substantial holding in Alesco – currently 29.41 per cent – for six days.

InvestSMART FORUM: Come and meet the team

We're loading up the van and going on tour from April to June, with events on the NSW central & north coast, the QLD mid-north coast and in Perth, Adelaide, Melbourne, Sydney and Canberra. Come and meet the team and take home simple strategies that you can use to build an investment portfolio to weather any storm. Book your spot here.

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