While we mightn’t be returning to the private equity binge days of the pre-GFC era, compelling takeover targets are continuing to attract attention from the once enormously active sector. While Pacific Brands apparently hasn’t officially heard about it yet, another private equity player is reportedly speaking to banks about financing a bid for the clothing manufacturer, which is currently locked in discussions with Kohlberg Kravis Roberts. Meanwhile, Macquarie Group is really stirring, having been named as a bidder for the enormous asset management arms of Deutsche Bank. Elsewhere, Gina Rinehart’s ambitions are said to go beyond her current 13 per cent stake and even just a seat on the board, Rio Tinto has helped BHP Billiton exit the titanium minerals business and Nathan Tinkler is always looking for a good deal.
Pacific Brands, TPG Capital, Kohlberg Kravis Roberts
Pacific Brands shareholders hoping that discussions with private equity group Kohlberg Kravis Roberts haven't fallen over can possibly rest a little easier now, with a report of another private equity player saddling up. The Australian Financial Review reports that TPG Capital is speaking to a syndicate of banks about a $580 million bid for PacBrands.
First and foremost, the newspaper says TPG has not spoken to PacBrands about its intentions, or the clothing company’s advisers Flagstaff Partners or lawyers at Minter Ellison. It’s understood that TPG is waiting to see what happens with KKR. This is not yet the beginning of a bidding war.
Nonetheless, we’ve now got a theoretical floor to price discussions between PacBrands and KKR. Previous reports indicated that the two sides had not discussed a price target, but estimations centred on a range between $600 million and $700 million. This latest report should give PacBrands chief executive Sue Morphett something useful to work with at the negotiating table.
Macquarie Group chief executive Nicholas Moore has underlined asset management as a crucial focus area for the silver donut under his stewardship, if the latest reports are to be believed. According to Bloomberg, Macquarie is one of four bidders battling for Deutsche Bank’s asset management arms. The other three are JPMorgan Chase, State Street and Ameriprise Financial. A price has not been mentioned, but these divisions have about €400 billion under management ($494.8 billion), according to Bloomberg’s sources.
To put this into context, the last acquisition Macquarie completed of this type was the purchase of Delaware Management Holdings from Lincoln National Corp. The transaction was worth $428 million and that won Macquarie another $126 billion in assets under management for a combined total of over $300 billion between the two groups.
Gina Rinehart, Fairfax Media
Australia’s richest woman, Gina Rinehart, is approaching 13 per cent ownership of Fairfax Media with a target of 14.9 per cent. While brokers Morgan Stanley mightn’t have snapped up the shares in one swoop, it’s Gina Rinehart – it doesn’t matter how long it takes to get the shares, she’ll get them in the end.
Value has been comprehensively dismissed as her primary motivation for the buying spree; it’s influence and clout that Rinehart’s said to be after. However one of Fairfax’s largest shareholders, Orbis Australia, says it would not support a board seat for Rinehart simply because she’s the company’s largest stockholder. Orbis fund manager Simon Marais – well known in recent times thanks to his opinions on the Spotless Group takeover – made the comments to The Australian.
Then again, there is a report – not just speculation – that Rinehart plans to take her stake above 20 per cent. The Herald Sun brings word from a source who claims Rinehart has been planning this move on Fairfax for a "long time” and intends to increase her stake to 20 per cent and seek to become chairman of the group.
Rio Tinto, BHP Billiton
Rio Tinto is shaping up as the mining dealmaker of 2012. After securing Canada’s uranium hopeful Hathor Exploration in early January, followed by a majority stake in fellow countryman Ivanhoe Mining, then agreeing yesterday to sell its stake in the UK’s Kalahari Minerals to China Guangdong Nuclear Power Corp – with its stake in the real target Extract Resources soon to come into question – the mining giant has sealed yet another deal, this time with arch-rival BHP Billiton.
Rio will now take a controlling stake in Richards Bay Minerals, a South African mineral sands miner, by picking up BHP’s 37 per cent stake. This will double Rio’s holding to 74 per cent. BHP exercised an option to exit its stake – a price was not disclosed – and will depart the titanium minerals industry by doing so. RBM accounts for 25 per cent of global titanium feedstocks (titania slag and rutile), 33 per cent of zircon and 25 per cent of high purity pig iron.
Still on mining, Andrew Forrest has largely waved goodbye to one of the first major shareholders to believe in his dream to build a third force in Australian iron ore. New York-based investment fund Leucadia National informed US regulators that it has reduced its stake in Fortescue Metals Group from 92 million share to 30 million, picking up $US500 million ($470.4 million) in the process. Leucadia was there with Fortescue in the early days, providing important cash at a time when Forrest didn’t have a railway line to Port Hedland for an iron ore train to sit on.
Optus, Telstra, AFL, NRL
Telstra Corp might have to try to rip up its $153 million exclusive internet broadcasting rights deal with the AFL if the latest court victory by Optus is upheld. Justice Steven Rares of the Federal Court in Sydney ruled that the Optus TV Now service is like a modern TV recorder, in that a recording of a live AFL match is made for each individual and it’s up to them to download it – sometimes only on a two-minute delay. It’s the same copyright exclusions afforded to the videotape recorder.
Telstra, the AFL and NRL were ordered to pay Optus’ costs, but the more pressing matter is what happens to that exclusivity contract, which loses significant value two minutes after the first bounce of every game. Although as Business Spectator’s Stephen Bartholomeusz points out, it’s not difficult to imagine the nation’s sporting codes – all of which are financially threatened by this decision being upheld in the High Court, if it’s appealed that far – using their significant political weight to pressure Canberra into changing the laws. It’s mobile versus every popular televised sporting code in the country.
Drillsearch Energy, British Gas
Drillsearch Energy has received an endorsement of sorts from energy giant British Gas, with the UK major taking a 9.4 per cent stake in the Australian shale gas company. BG exercise options for the stake at 62c each, not bad or surprising when you consider that Drillsearch shares last traded at $1.02. But the sale goes deeper than that. BG is pumping billions into its Curtis Island export facility and the strategic alliance between these two companies serves that end.
Rare earths miner Lynas will be thrilled to know it can finally start operating its $200 million refinery in Malaysia after the Atomic Energy Licencing Board granted it a temporary licence, despite local protests. A little late, but welcome nonetheless.
Mining tycoon Nathan Tinkler has enough time on his hands to try to seal the $5.1 billion merger between his Aston Resources and Whitehaven Coal, and also look for other compelling deals on the side. The Australian Financial Review got word that Tinkler was interested in picking up all 30 million shares from the placement of Queensland coal junior Endocoal. The paper says he fell short and the financial partners won out.
Speaking of less successful resource players, Yara and Apache Corp have agreed to pay ANZ Bank $US582 million ($549 million) for what’s left of the collapsed Burrup Fertiliser, left by Pankaj Oswal. It ends a year of squabbling over asset with receivers PPB Advisory.
Meanwhile, speculation is increasing that Qantas Airways will be forced to issue a capital raising in the not-too-distant future after its investment-grade credit rating was downgraded by Moody’s. Qantas is in the middle of trying to pick a place to base its premium regional Asian airline – the choice is between Malaysia Airlines and Singapore Airlines, at either of their respective hubs.
Building materials producer Boral has offloaded its Indonesian business, considered a non-core asset, for $US135 million ($127.9 million). The proceeds will be used to reduce debt.
And finally, digital media junior Webfirm jumped 13 per cent yesterday, courtesy of a partnership with online travel major Wotif.com.