BREAKFAST DEALS: NABbing a share

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The market mulls what AMP will do now that NAB has trumped it with an AXA Asia Pacific bid. Elsewhere, BHP, Rio and Vale prepare for fresh pricing talks.

National Australia Bank, AMP, AXA SA and AXA Asia Pacific Holdings

Where to next for AMP after declaring Monday's sweetened proposal as 'best and final' and the National Australia Bank now stealing its thunder by announcing its intention to effectively replace AMP in a takeover bid for AXA Asia Pacific Holdings? Following yesterday's shock announcement, AMP said in a two-line statement that it was carefully considering its position, and noted its exclusivity agreement with AXA SA until February 6. Questions are now being asked about whether AMP can make another move given people would have traded on its announcement four days ago which stated: "If the AXA AP independent directors do not accept and recommend the revised proposal to minority shareholders and AXA AP does not execute legal documentation by 21 December 2009, AMP and AXA SA will regard the AXA AP independent directors as having rejected the proposal and it will lapse.” The statement also said the revised proposal had been declared best and final by AMP and AXA SA, and the total number of AMP shares and the total amount of cash including the dividend would not be increased. Presumably, AXA APH would have been working under that assumption also. On the other hand, AMP could argue that given its proposal was just that – a proposal – and did not meet a key condition of gaining AXA APH independent director approval, a new proposal would therefore be viewed as a fresh offer. The Monday announcement also noted that a key condition of the offer included unanimous agreement of AXA APH's independent directors, subject to the opinion of the independent expert and no superior proposal emerging. AMP would also be cognisant that failure to get hold of AXA APH could leave it open to takeover offers.

Meanwhile, the Australian Securities Exchange (ASX) is querying National Australia Bank over yesterday's sequence of events, whereby news that the lender intended to effectively take AMP's place in a takeover bid for AXA Asia Pacific Holdings failed to appear on Iress Markets live news screens until after a teleconference had began. At issue is whether NAB put out a press release regarding the AXA APH proposal before informing the ASX. AXA APH says disclosure was confirmed as lodged at 9.25am, while a NAB spokesman was unaware of the review and declined to comment. While the ASX investigation won't curtail NAB's bid, the bank could face some sort of punishment if it's found to have failed to adequately inform the market of its plans, especially if traders were able to trade on the information before a trading halt was called.

Legal wrangling aside, the NAB offer has also thrown up questions about its UK operations, although as Stephen Bartholomeusz points out, comments by chief executive Cameron Clyne that the bank had been approached by players in the UK market to see how the lender could work with them to participate in market consolidation could just as easily be viewed as a signal of further expansion, rather than exit. Given the impending sell-offs by troubled banks the Royal Bank of Scotland and Lloyds, NAB may well choose to capitalise on the opportunities presented in the UK market at presumably attractive prices. Clyne has also expressed an unwillingness to divest assets – the Clyde and Yorkshire banks – in the midst of troubled times in the UK. Still, given NAB's recent $4.6 billion commitment to AXA APH and accompanying $1.5 billion rights issue, as well as the Aviva, Goldman Sachs JBwere, and Challenger Financial Group deals, it's possible NAB shareholders will be tentative about another acquisition. (NAB says its pro forma tier 1 capital will sit at around 8.9 per cent post AXA APH acquisition and rights issue). But back to the NAB's proposal to pick up AXA APH's local and New Zealand operations, which will see Australia's largest lender also become the market leader in super and life insurance. While it's unusual that NAB had not consulted with the target's major shareholder before making the announcement, it's expected that AXA SA won't care all that much whether it works with AMP or the NAB to get its hands on AXA APH's prized Asian assets.

Finally, revelations yesterday from AXA APH chairman Rick Allert that the company had received a number of proposals from other bidders (he refused to go into detail which parties) demonstrate the strength of interest in the company, especially given that there are fewer opportunities post-GFC for the big banks and others to bulk up. And a question at the NAB AGM yesterday about whether NAB had held talks regarding Suncorp-Metway's banking or insurance businesses was met with a 'no comment'.

CSR

But it's not all about banks and wealth today: the first hearing in the Federal Court regarding the diversified industrial company's plans to demerge its sugar and renewable energy business has been adjourned, expected now on January 15. The NSW government, ASIC, the Asbestos Injuries Compensation Fund and rival building products group James Hardie have raised concerns the proposed demerger will affect CSR's ability to meet its $300 million asbestos liability and how much gearing the company will be left with, with the asbestos liability likely left with the building products unit. This follows the state and federal governments stepping in to provide a $320 million loan after the company's half-year net loss of $155.6 million in October left it unable to pay its Asbestos Injuries Compensation Fund for the year, the Herald Sun reports. But CSR has stood by the demerger, saying it would not proceed with the plan without ensuring future claims are met. CSR, which recently completed a $375 million capital raising to pay down debt and generate funds for the demerger, hopes it will be completed by the second quarter of 2010.

Warrnambool Cheese and Butter Factory

Analysts have been making positive noises about Warrnambool Cheese and Butter Factory, with Stock Resource suggesting the unnamed bidder might need to double its current offer as the takeover target's share price strengthens. Royal Bank of Scotland says better dairy prices and milk volumes auger well for the Victorian dairy company, with improved earnings and likely corporate activity part of the appeal. It has placed a target price of $3.43 on the stock, from $3.08. And now independent research house Stock Resource says although the bid was expected to have been priced at between $2.80 and $3, something in the order of $5 is probably required, The Australian reports. But co-founder Grant Craighead, formerly of Macquarie, adds that if the bidder is an incumbent dairy producer there is scope for a lower bid. Warrnambool shares closed yesterday at $2.64. CHAMP Private Equity has been named as the company most likely behind the bid.

Energia Minerals

It was a good day yesterday for Carbon Energy spinoff, Energia Minerals. The uranium company's IPO closed oversubscribed yesterday, raising $7.5 million at 20 cents each. A listing by the end of the year is tipped (here's hoping for no delays a la Q Copper and Talison Lithium). The spin-off comes as Carbon Energy looks to divest non-core assets to concentrates on clean energy production from coal via underground coal gasification (UCG) technology.

Wrapping up

Finally, agrichemicals group Nufarm might tell the market shortly it has agreed to a new deal with China's Sinochem that is lower than the original $13 per share figure, The Australian Financial Review reports. The pair has until December 23 to make an agreement, having failed to cut a deal by the end of exclusivity agreement on December 3. While Alan Kohler has predicted an announcement today from the government and Telstra regarding their national broadband network discussions, rival Singapore Telecommunications has warned of a sweetheart deal between the pair over the next couple of months and suggested the government might not have the ticker to split the telco. Meanwhile, distressed asset investor Hamilton Securities is offering $100 each for debentures sold by the collapsed Timbercorp Orchard Trust, telling noteholders the offer provides them with an exit route from their investment. Elsewhere, Japanese steel giant JFE Holdings will make a $US560 million investment in the QCoal-owned Byerwen coal mine in Queensland and says it plans to triple the ratio of coal it buys from its own mines to 30 per cent, and boost investments in iron ore mines. The move comes as dominant players BHP Billiton, Rio Tinto and Vale prepare for fresh pricing talks, expected to deliver the iron ore giants price increases of around 20 to 30 per cent. And finally, Qantas budget offshoot Jetstar is tipped to announce an operational joint venture with Malaysian-based AirAsia which will see the pair save money by jointly purchase aircraft, parts and other goods, according to The Australian. And coming up on Deals TV today, we'll be looking at M&A tables, Caltex and Mobil, and much more.