Gunns snares a hefty investment from a partial takeover, while Telstra shareholders hope for a special dividend.

Telstra boss David Thodey stands atop a company with one of the best dividends in the business that feeds an enormous register of retail investors, many of which have been there from the beginning. Thodey set tongues wagging last month when he started talking seriously about capital management, and a recent share price uptick has been coupled with speculation that his first official outing since those comments this morning could include some more details. Meanwhile, Woolworths has reportedly put a range of figures to what Dick Smith would be worth. It’s not a lot, but it’s better than what others were anticipating. Elsewhere, Gunns shareholders are thrilled with the deal struck with billionaire Richard Chandler, Ansell is on the hunt and Rio Tinto has added another leader for its Pacific Aluminium advisory team, with results due today.

Telstra Corporation

At the start of the year analysts and commentators were preparing their followers for the disappointing reality that after a near-20 per cent rally in 2011, Telstra Corporation shares didn’t have much reason to outpace the market in 2012. It might be early days yet, but so far they’ve proved right. However, in the last five trading sessions Telstra shares have added more than four per cent, while the broader market is up about 1.5 per cent.

The reason is that Telstra’s share price strength last year was attributed to two things, one of which hasn’t played out. The first was a recognition that the National Broadband Network deal was a windfall for the company and coupled with its strategic grab for mobile phone customers at the expense of Vodafone, Telstra was asserting itself again in the way that the country’s dominant communications company should.

The second was the prospect of capital management. You might remember Telstra chief executive David Thodey started talking seriously about the prospect, which could take the form of a share buyback or special dividend. It should be noted that recently departed and well-respected chief financial officer John Stanhope was an outspoken critic of special dividends because they don't reward long-term shareholders. Whatever the case may be, Telstra’s first set of results since Thodey’s comments are due today and investors have jumped on board in anticipation of any hints.

Woolworths, Dick Smith

Woolworths chief executive Grant O’Brien seems to think he can get more for the supermarket giant’s consumer electronics chain Dick Smith than perhaps some others do. The Australian Financial Review says a flyer sent out to 10 possible domestic and international buyers indicates by adviser Greenhill Caliburn that the business could be worth between $204 million and $306 million. That’s a couple of notches higher than the $150 million that Citigroup has the business valued at.

Gunns Limited, Richard Chandler Capital

Timber company Gunns Limited has forfeited a lot to win the support of New Zealand born billionaire Richard Chandler, but the sacrifice appears to have been worth it. Chandler, through the company that bears his name, has injected $150 million into the forestry company, which will be coupled with a $130 million 1.3-for-one share rights issue at 12 cents a share.

The deal might leave Chandler with a stake upwards of 39 per cent and the issue is almost dead level with the company’s share price before the announcement, but that didn’t stop the stock from rocketing. Gunns shares surged as much as 60 per cent, but eased to finish the session a still-impressive 36 per cent higher at 17 cents.

This is technically a partial takeover and the share price reaction to some degree reflects as much – a compelling 30 per cent premium. But the stock move is more a reflection of the perceived increase in Gunns’ chances of getting the $2 billion Bell Bay pump mill in Tasmania.


Glove and condom maker Ansell is reportedly set to conquer new territory with chief executive Magnus Nicolin saying there’s a strong chance of a takeover in the next few months. Ansell recently picked up almost 10 per cent of Lakeland Industries, which is listed on the Nasdaq, putting the speculation squarely at its feet. "Our M&A sweet spot is $US30 million to $US75 million, but as you know we can’t always hit that sweet spot,” Nicolin told The Australian.

Ansell booked a mixed set of numbers yesterday, reporting just a 1.1 per cent rise in first-half net profit with a strong Australian dollar, soft European market and IT problems standing in the way of better news. However, the company has extended its line of credit by $US145 million ($134 million) to $US300 million.

Royal Bank of Scotland

Apparently there are two players left bidding for the Royal Bank of Scotland’s Asian equities, mergers and acquisitions and research business. According to the Financial Times, Malaysia’s CIMB and China International Capital Corporation are still on the hook and people familiar with the matter say the business, that includes the Australian operations, could fetch up to $50 million. Other reports, however, indicate that the field has been narrowed to just CIMB. News on the sale, which is being handled by Lazard, is expected today.

Macquarie Group

Still in financials, Macquarie Group chief executive Greg Ward has tried to put a bad set of numbers behind him, brought about by a string of poor takeovers in Europe, by talking about more takeovers. Speaking to The Australian Financial Review, Ward said the company would "dearly love” to grow its asset management footprint across Europe, the US and Asia. This comes on the back of news that Macquarie is believed to be one of four bidders fighting for Deutsche Bank’s asset management arms. The other three are JPMorgan Chase, State Street and Ameriprise Financial. Maybe the best form of defence is attack.

Wrap up

Mining giant Rio Tinto will hand down its results today and in all likelihood show up its rival BHP Billiton, but that doesn’t mean the company has no pressing issues. There’s of course the company’s Pacific Aluminium spin-off that could take some effort getting off the ground. According to The Australian Financial Review, Rio has added Morgan Stanley to the float team, which already includes Credit Suisse. Speaking of Rio, Decmil has picked up a five-year framework agreement with the mining giant for civil works at its enormous and expanding Western Australian iron ore operations.

Leighton Holdings subsidiary Thiess has also picked up some more work. This $325 million contract is with QGC to help with the construction of gas processing facilities. The work will cover six field compression stations, along with one processing plant in the Surat Basin

And finally, NBN Co has handed out a $620 million contract to Calafornia’s Space Systems/Loral for two Ka-band satellites to be launched in 2015 as part of the wireless component of the National Broadband Network.


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