BREAKFAST DEALS: Murky Billabong

All eyes are on Billabong's change of control proposals, while Singapore Airlines spins a Tiger tale for the ACCC.

Billabong International is reporting results at the end of this week and preparing for a company reporting restructure. But all eyes are on the two remaining weeks that the company says it will entertain change of control proposals. Meanwhile, Tiger Airways’ owner Singapore Airlines is engaging in a rather uncomfortable debate with the ACCC. Elsewhere, Wilson HTM is thinking about legal action against suitor Mariner Corporation, while the reporting season carries a certain amount of risk for IPO hopefuls.

Billabong International, Paul Naude, Sycamore Partners, VF Corporation, Altamont Capital Partners

There’s a fortnight left before Billabong International should be able to tell its shareholders whether a change of control deal can be reached. In the meantime, chief executive Launa Inman is continuing on as if her four-year turnaround strategy is going ahead.

Billabong has recently appointed former financial boss of its US business, Peter Bryant to oversee a restructure of the company’s reporting and operational structures.

The appointment has come on the back of a series of senior management dismissals from Inman as she clears the decks ahead of a long recovery or a swift takeover.

It’s been seven weeks since Billabong told shareholders that US director Paul Naude and financial backer Sycamore Partners, a New York-based private equity firm, would need up to six weeks to conduct due diligence.

It’s also been four weeks since Billabong told shareholders that US retailing giant VF Corporation and San Francisco’s Altamont Capital Partners had joined Naude-Sycamore with an indicative, non-binding $527 million proposal at $1.10 a share.

Billabong said it needed six weeks, from January 14, to sort this out.

With two weeks to go, Naude and Sycamore have probably found out all that need to know about Billabong and VF-Altamont must be getting pretty close.

The share price has wavered a little from a high of $1.02 on January 18 to be sitting at 96.5 cents a share, which is a 12.3 per cent discount on the indicative offer price. That really underlines just how little money has actually been bet on the ‘hopes’ of a Billabong bidding war.

PS – Billabong is reporting Friday week, perhaps we’ll get a snippet as to what’s going on then.

Virgin Australia, Tiger Airways

It’s got to be somewhat embarrassing when the chance of getting your wishes from the competition regulator rests on your ability to convince them you don’t know what you’re doing.

That’s the fine line that Singapore Airlines, owner of lowest-cost carrier Tiger Airways, has to walk with the Australian Competition and Consumer Commission.

Singapore Airlines has released a statement to the Singapore stock exchange indicating that it "does not plan to seek new investors” for the troubled Tiger if the consumer watchdog rejects Virgin Australia’s bid for a 60 per cent stake in the business.

''Tiger does not see, for example, a buyer who is a financial investor or non-Australian airline being able to provide operational synergies to enhance Tiger Australia's competitiveness,” the company said in the statement.

"In other words, a new investor will not achieve Tiger's objective to turn around Tiger Australia.''

What’s quite obviously left unsaid is that Tiger appears to have conceded that it alone can’t turn Tiger around and that withdrawing altogether from the market is a real possibility. Why else would Singapore Airlines be so upset at the prospect of the deal being blocked?

These will not be comforting words to ACCC boss Rod Sims. What Tiger is effectively saying is there’s no other airline that can help it out in Australia other than Qantas; and Sims isn’t about to let the dominant player take out Tiger.

Wilson HTM, Mariner Corporation

Stockbroker Wilson HTM is reportedly considering legal action against suitor Mariner Corporation, which has just extended its scrip takeover offer until June 15.

That’s an unusually long time to pitch a takeover offer. Deals of this nature are normally measured in months – two, maybe three at the most. Four is mischief territory.

The Australian has spoken to Wilson HTM chief executive Andrew Coppin, who says the bid hasn’t just cost the board and management time, but also $100,000 in legal bills so far.

Adding insult to injury, Wilson shares have jumped by two-thirds since the Mariner deal was announced, while its suitor’s stock has almost halved.

That might sound like good news, but when your suitor is offering scrip, you’d prefer that scrip not plunge in value.

"I would be interested to know on what basis, with a bid that has now destroyed half the trading price for Mariner, what is the justification for having an extended bid,” Coppin said. The bid was originally scheduled to expire this Friday.

Mariner has been getting up a few noses lately. So much so that a recent bid for streetwear company Globe International prompted a response from a major shareholder with some choice language this columnist certainly appreciated.

iSelect and the IPO waiting game

This week Australian investors will get a look at some big corporate earnings that could make-or-break the market rally and with it the renewed optimism around initial public offerings.

JB Hi-Fi, Bradken, Tabcorp, Commonwealth Bank, ANZ Banking Group, CSL, Ansell, Boral, Computershare, Goodman Fielder, Stockland, WorleyParsons, Rio Tinto, Wesfarmers, Downer EDI, Westfield Retail Trust, Mirvac Group, David Jones and Whitehaven Coal and more are releasing data that will be poured over by analysts, investors and journalists.

After a brief hiccup on Tuesday last week, courtesy of the Macquarie Group results, the market continued to gain strength going into Friday, bringing the rally since November 16 to 14.6 per cent.

The bulls still have the numbers.

However, earnings expectations have not gone up over the same period, if anything they’ve deteriorated.

This means that if a small handful of those aforementioned companies delivers an unexpected nasty surprise to the market, this rally is over and we could be set for a not altogether unnoticeable correction.

With that will go the enthusiasm that’s been creeping back into the market about IPOs. Many have been sidelined particularly over the last 12-18 months thanks to turbulent equity markets.

Granted, international conditions have improved remarkably since November and the slurry of central bank dollars flooding international markets will lend support to equities regardless of how good or bad the Australian earnings season is.

But the potential for a correction means there’s real risk in the system for companies planning a float.

As such, keep your eye on iSelect. The Australian Financial Review believes that the first-quarter float will probably be pushed back to the second quarter.

This is because pre-marketing won’t commence until after reporting season and, apparently, major shareholder Mi9 is still mulling what it wants its ownership levels to be.

While this isn’t a firm sign of a lack of confidence in the market, iSelect is a well-respected online up-and-comer – it’s an ideal IPO candidate.

If that timeline gets pushed out any further, it won’t bode well for less well positioned companies that want to tap the market.

Wrapping up

Is it all in the name?

Federation Centres, formerly known to us all as Centro, has signed a $371.4 million deal with superannuation funds and ISPT Pty Ltd.

The deal entails is the sale of a 50 per cent stake in four sub-regional shopping centres and a convenience centre by Federation in exchange for funds that will be used for desperately needed redevelopment and acquisitions of its own.

The Australian reports that US- and Australia-focused oil and gas explorer Strata-X Energy is making real progress towards an Australian listing with its IPO oversubscribed in a big bad way. The company is already listed in Toronto.

And finally, The Australian Financial Review understands that APN News & Media and News Limited are considering a printing partnership in Queensland in order to bring costs down.

The newspaper says that executives from the two publishing rivals are starting with Queensland because they both dominate the newspaper landscape there via News Limited’s The Courier-Mail, The Townsville Bulletin and TheGold Coast Bulletin and APN’s The Sunshine Coast Daily, The Daily Mercury in Mackay and Ipswich’s The Queensland Times.

News Limited is also the owner of this website.

{{content.question}}

SMS Code Sent…

Hi {{ user.FirstName }}

Looks like you've already taken a free trial

Please enter your payment details

We have sent you a code via SMS to {{user.DayPhone}}

please enter this code below to activate your membership

If you didn't receive SMS code please

Looks you are already a member. Please enter your password to proceed

Please untick this box when using a public or shared device


Verify your mobile number to unlock a FREE trial

Please sign up for full access

Updating information

Please wait ...

  • Mastercard
  • Visa

Related Articles