BREAKFAST DEALS: Macmahon in the middle

Macmahon finds itself at the centre of a risky bidding war, while CapitaLand contemplates an Australian exit.

Macmahon Holdings has a bidding war, of sorts, on its hands between Leighton Holdings and Sembawang Australia. What would normally be a dream come true for Macmahon is actually a delicate and potentially damaging wager. Australand’s situation has changed irreversibly with GPT Group circling and majority shareholder CapitaLand wanting out. Elsewhere, Billabong’s new recruits are apparently getting a form of takeover insurance, while Australia’s two print media companies are dealing with shareholder selldowns.

Macmahon Holdings, Sembawang Australia, Leighton Holdings

Macmahon Holdings is now facing the tough decision of whether to risk its construction business deal with its loyal major shareholder Leighton Holdings in order to pursue a little extra cash with Sembawang Australia.

Sembawang, a subsidiary of Indian major Punji Lloyd, has increased its offer for Macmahon’s whole construction arm to $38 million from $25 million. That’s a 52 per cent bump, hard to say no to in any context.

Leighton, which has already conducted due diligence, is offering to purchase projects within the construction business for $20 million, effectively taking what has proved to be troubling work for Macmahon off its hands. Sembawang has proposed to do the same for $25 million.

The Macmahon share price rose 1.8 per cent on the news as the board indicated that it is considering the new proposal. If it’s to have any hope of securing extra Sembawang dollars it need to open the doors to due diligence, something that Leighton clearly doesn’t want.

This case underlines the reality that bidding wars, usually a target company’s fantasy, aren’t always a welcome development.

Leighton stood by Macmahon during its $90 million capital raising in December, taking up its full entitlements and increasing its stake in the company to 24 per cent from 19 per cent in doing so. The construction giant could easily have walked away; it’s not as if Leighton hasn’t had its own problems over the last few years.

Sembawang Australia chief executive Richard Grosvenor, a former Leighton executive, maintains that his company has been eyeing off Macmahon’s construction business "for over four years now”.

The obvious question is why did they wait until Leighton was in such a dominant position?

Australand, CapitaLand, GPT Group

Australand has assembled a compelling defence team as it tries to balance the desires of a bidder for certain assets and a looming exit of its majority shareholder.

Singapore’s CapitaLand, which holds 59.3 per cent of Australand, has announced a strategic review where its Australian business is on the chopping block.

The news comes on the back of a $3 billion offer from Australia’s GPT Group for Australand’s investment properties and commercial and industrial businesses. Mirvac Group is also thought to be very interested, although it hasn’t declared it hand yet and doesn’t have a truckload of cash to work with.

As Business Spectator’s Stephen Bartholomeusz pointed out yesterday, Australand’s ultimate fate is very much out of its hands. If a majority shareholder wants out then there’s a deal that must be done, which means talking to GPT.

Australand announced yesterday that it has called in Macquarie Capital, Fort Street Advisers and King & Wood Mallesons to help the board.

"The directors will keep security holders informed of any material developments as they occur,” the company said in a statement to the ASX.

It’s been clear from the get-go that CapitaLand would call the shots in this play.

Billabong International, Paul Naude, Sycamore Partners

Embattled surfwear company Billabong International is reportedly offering generous redundancy packages to those filling crucial senior management roles in the wake of a string of departures.

The company, which suffered from perhaps the most embarrassing and damaging takeover plays last year, has a number of key positions to fill including the replacement of chief financial officer Craig White.

But those appointments, made at the beginning of a four-year turnaround strategy under chief executive Launa Inman, are also vulnerable to a $527 million takeover proposal lobbed by Billabong’s American business boss and director Paul Naude.

Naude and co-bidder Sycamore Partners are currently conducting non-exclusive due diligence after lobbing an indicative, non-binding $1.10 bid.

The Australian believes that Inman is offering the new recruits handy payouts in the event that Naude’s offer ultimately wins the support of the board and the register, and they subsequently loose their jobs.

It’s a pretty standard practise to reward the risk that candidates are taking by surfing with Billabong amid choppy conditions.

But the bidding pair will be interested in the terms offered to the new recruits as the larger the payouts, the more painful it will be for the potential new owners to restructure the company if they choose a different strategy to Inman.

Billabong’s stock price isn’t showing a lot of confidence amongst the register, with the shares trading at 87 cents each. That’s a 26.4 per cent discount on the offer price, or Sundance Resources territory for those close M&A watchers.

News Corp, First Super, Fairfax Media, Maple Brown Abbott

Both of Australia’s leading print media companies have seen a major shareholder lose a little love for their shares.

Industry super fund First Super announced yesterday that it will begin to sell down its stake in News Corp, the parent company of this website, after the failure of governance reform proposals to shift power away from the Murdoch family in October.

The rather modest $7 million stake, which made a 43 per cent return in 2012, will be sold down.

Rival publisher Fairfax Media has been the subject of speculation courtesy of new shareholders buying in.

But a substantial shareholder notice to the ASX yesterday indicated that investment manager Maple-Brown Abbott has reduced its stake in the company to 7.93 per cent from 8.93 per cent, bringing the value of its stake at yesterday’s closing numbers to $99.8 million from $112.6 million.

Wrapping up

Armed with its freshly issued -BB credit rating from Standard & Poor’s, Nine Entertainment hosted lenders in the United States overnight to raise $700 million in debt, according to The Australian Financial Review.

The newspaper understands that chief executive David Gyngell was not present, but did make himself available for calls.

And finally, the Australian Office of Financial Management has sold $500 million of Treasury Notes maturing in March 2013.

The AOFM runs bond sales on behalf of the government. The latest notes went for an average weighted yield of 2.96 per cent.

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