Rupert Murdoch is set to put a split proposal before his fellow News Corp directors a year after labelling such a move as "rubbish”. What’s changed the media mogul’s mind? Elsewhere in media, Fairfax has rejected Gina Rinehart’s push for board seats once again – what will she do with her 18 per cent stake? Alesco Corporation has fired back at DuluxGroup, which was firing at Alesco – underlining just how stuck with each other these two are. Elsewhere, James Packer is considering a deal in The Philippines, while Chinese banks are looking for a greater slice of Australia’s syndicated loans market.
News Corp, Rupert Murdoch
Media mogul Rupert Murdoch dismissed the idea of a demerger of his company’s publishing and entertainment divisions as "rubbish” about a year ago.
But the News Corp directors are reportedly set to vote on just such a proposal, with details to emerge as early as this morning from an unscheduled board meeting in New York (this morning Australia time).
According to media reports, Goldman Sachs and Centreview have been retained as advisers on any split process that stems from the meeting.
As Business Spectator’s Stephen Bartholomeusz explains, the reasons for such a move are well established, as shareholders have been calling for it for years. The entertainment operations of the company generate the vast majority of the earnings, while the publishing arm is struggling amid declining advertising revenue and scandal in the UK.
One thing’s for sure, Murdoch would not be "warming” to this proposal, as reported by the Wall Street Journal, without assurance that it would at least maintain and possibly enhance his family’s control over the company. Share price appreciation has never been his main priority.
The question is, what is the catalyst that’s shifted Murdoch’s thinking?
Some have pointed to the growing prominence of chief operating officer Chase Carey. Perhaps the increasingly visible News executive has managed to sway the octogenarian.
Others have suggested that this could be related to the diminished influence of Murdoch’s once most likely successor, his son James, thanks to the News of the World scandal, and the lack of a credible case to elevate his other son Lachlan or daughter Elisabeth to the top job. Basically, split the company to satisfy the register, buying time to select a successor.
Nevertheless, this could prove to be the last big move that Murdoch can do to secure the ongoing influence of his family as well as his own legacy as a media executive.
Are we really meant to believe that he has just suddenly ‘warmed’ to the idea?
Fairfax Media, Hancock Prospecting, Gina Rinehart
Fairfax Media chairman Roger Corbett has stared down a threat by mining billionaire Gina Rinehart to effectively short the company’s languishing share price if she doesn’t secure boardroom representation.
Last night, Fairfax issued a statement indicating that it had been unable to accommodate Rinehart’s request for a board seat – her company Hancock Prospecting is seeking three – with the sticking point being editorial independence.
The Australian believes that the Fairfax board has taken legal advice on its refusal to grant Rinehart a seat.
Corbett exuded confidence that he has the support of the company’s stakeholders. "The company has received tens of thousands of emails and other correspondence from shareholders, our readers and others, making it clear that they support Fairfax's long-standing position on editorial independence.”
The Australian brings word from Perennial Value managing director John Murray and Allan Gray’s Simon Marais, both who control big shareholdings in Fairfax, who are opposed to Rinehart controlling the destiny of the company without a takeover premium.
Those shareholders that wrote in would presumably acknowledge the consequence of this action might be that Rinehart sells her 18 per cent stake in the company, sending the share price further south.
Hancock pre-empted Fairfax with a statement of its own. Chief development officer John Klepec said the company would be "prepared to acknowledge” Fairfax’s governance principles "subject as they must be, to the overriding fiduciary duties of directors”.
Klepec went on to say that editorial independence had been "repeatedly overridden in the past,” citing the compulsory support of Earth Hour for journalists.
Until Fairfax starts talking bluntly about how its problems are unrelated to its independence and Rinehart starts talking publicly about how her directorship in Ten Network hasn’t resulted in a serious shift to the right, this to-ing and fro-ing where neither side really engages can continue.
While Ten is on the agenda, a close adviser of Lachlan Murdoch, Siobhan McKenna, has joined him on the network’s board, filling the seat left vacant by billionaire James Packer.
And just to touch base with Rinehart’s mining interests, Brookfield has secured a $190 million contract to design and construct housing for Rinehart’s $10 billion Roy Hill iron ore project.
DuluxGroup, Alesco Corporation
Garage door maker Alesco Corporation has hit back at claims from predator DuluxGroup that its target statement was "misconceived and deficient”.
Late last week, Dulux issued a 30-page response to the target statement where, amongst other things, Dulux chief Patrick Houlihan said his company would be "happy” to sit on the register with 20 per cent, rather than overpay for the rest.
Yesterday, Alesco hit back with its response to the response, where it attempted to trivialise much of Dulux’s 30 page document as "rhetoric”.
"Dulux has not ruled out increasing its offer,” said Alesco, which is currently priced at $188 million, or $2 a share.
"At the same time, Dulux has made no attempt to engage with your board on addressing the inadequacy of its offer.
"Your board remains unconvinced by Dulux’s rhetoric.”
Dulux has taken issue with the $2.23-$2.52 valuation by independent expert Lonergan Edwards & Associates. Alesco is comfortable to stand behind it.
If Dulux calls off its offer and exits the register, it’s likely to take a hit on its $39 million stake as the share price would probably fall considerably.
Conversely, if it called off the bid but remained on the register, Alesco would be saddled with a major shareholder that was once a predator. Its share price would ebb and flow on any whiff of news that Dulux was about to exit the register out of frustration, or bid again. That’s an unwelcome distraction for management.
Whether they can work out a deal or not, these two could be stuck with each other, for better or worse.
Crown, Belle Corporation
Gaming billionaire James Packer has reminded the market that Crown’s casino interests are not confined to a site in Barangaroo, Sydney.
According to Dow Jones Newswires, Melco Crown Entertainment is poised to partner with Belle Corporation, owned by The Philippines' richest person, Henry Sy, on a development in Manilla. Reports indicate that the site could be worth $1 billion.
Belle has one of four casino licences in the Philippines that were handed out in 2008 and 2009.
Melco Crown Entertainment is a casino joint venture between Australia’s James Packer and Hong Kong’s Lawrence Ho, son of billionaire Stanley Ho.
Of course, we can’t seem to talk about Packer without another piece of news for Echo Entertainment.
According to The Australian Financial Review, Echo is hoping to purchase the Queensland government’s Supreme Court building for about $50 million. The newspaper says it would be a defensive strategy to secure control of the company’s casinos.
Premier Campbell Newman has consistently said he’s like another casino in Brisbane, resulting in a phrase Breakfast Deals would like to coin – Campbell Can Do Casinos.
AMP, Cavendish
AMP has jumped headlong into the self-managed superannuation fund industry with the creation of a new business unit and the acquisition of fund administrator Cavendish Group. The amount was undisclosed.
The new unit, AMP SMSF, will be specifically focused on the rapidly growing sector and will report directly to chief executive Craig Dunn.
AMP expects the SMSF industry to grow $2.2 trillion by the year 2030 as more future retirees shift away from the big superannuation funds and the value of those individually managed funds grow.
The new AMP unit will be led by current director of integration Paul Sainsbury, will assume the post on July 2, with the Cavendish deal expected to be bedded down by early July.
Still on Australian financials, Bank of Queensland has opted against selling its $230 million portfolio of non-performing commercial property loans after the offers it received failed to meet expectations.
Chinese banks
We can expect to see more banks from China to be popping up on lists of syndicated loan providers, according to The Australian.
The newspaper reports that players like the Industrial & Commercial Bank of China are trying to secure a greater chunk of the syndicated loans market, which has so far been dominated by the US and Europe.
According to Bank of America Merrill Lynch, Chinese and Japanese banks accounted for just 21 per cent of Australian syndicated loans, though that was 4 per cent higher than the previous year.
Syndicated loans are largely a feature of big energy and mining projects, as they require the collective support of a handful of banks.
It makes sense for China in particular to provide syndicated loan support to Australian resources projects as a compliment to their M&A activities because it will ultimately result in more resources coming to market, lowering the price.
Plus, it’s providing the demand for the projects themselves.
Wrapping up
Fortescue Metals Group chairman Andrew Forrest has continued his curious splash on his own company’s shares, which has now totalled more than $100 million.
Forrest has now accumulated $105 million worth of Fortescue stock, which is off 13.5 per cent this year. What the iron ore magnate is up to remains somewhat unclear.
Fellow resources player Woodside Petroleum will have to choose between two engineering consortiums for the onshore liquefied gas plant at James Price Point, The Australian Financial Review reports.
According to the newspaper, one group is made up of Chiyoda, CB&I and Saipem, while KBR, Leighton and John Holland make up the other.
Meanwhile, speculation is increasing that Boral might end up being broken up after the company’s second profit downgrade in a matter of months was accompanied by a promise that an equity raising would not be sought.
And finally, coal billionaire Clive Palmer is being dragged before the Takeovers Panel amid objections to the fashion with which he’s picked up the President’s Club, an unlisted company that owns timeshare stakes at his Coolum Resort.
The acquisition was made through a subsidiary of his Queensland Nickel Group called, quite simply, Queensland North Australia.
