PacBrands rises on rumours of a new bidder, while Leighton is hoping for a swift end to controversy.

Betting on private equity bids is a risky business. Higher bids are hard to come by thanks to internal parameters and their particular brand of opportunism is quite frequently met with a somewhat insulted target board – just think Spotless Group. While things have gone quiet at Pacific Brands, the company’s share price has been creeping upwards lately as investors contemplate the likelihood of a transaction with Kohlberg Kravis Roberts in the ring and TPG Capital sizing up some trunks. Elsewhere, Leighton Holdings is sitting on a deal tainted by bribery allegation in a region that is, if nothing else, sensitive at the moment. Meanwhile, Fortescue’s newest shareholder still remains a mystery, it’s African Iron’s big day and AGL Energy wants a Japanese slice of a Victorian power station at an absolute steal.

Pacific Brands, Kohlberg Kravis Roberts, TPG Capital

Pacific Brands shares have been inching steadily higher since the emergence of another possible bidder for the struggling clothes company. Twelves days ago, news emerged that TPG Capital was talking to a syndicate of banks about a potential $580 million run at PacBrands. That provided an interesting backdrop for the talks with rival private equity firm Kohlberg Kravis Roberts and pushed the share price up to 67 cents from 63.5 cents, giving the company a market cap of about $623 million.

Since KKR hadn’t actually engaged PacBrands, chief executive Sue Morphet had little need to address the market so things have gone pretty quiet. We haven’t heard any word from the company about TPG since the original announcement on January 10. Yet PacBrand shares are continuing to climb, having risen over five per cent since the KKR news, while the market has been almost dead flat over the same period. This gives the company a value of $656 million, which is almost exactly bang in the middle of the $600 million to $700 million price tags that were being thrown around when the TPG news first emerged.

Leighton Holdings, South Oil Co

Leighton Holdings revealed yesterday that the Australia Federal Police are investigating – at its prompting, it must be said – bribery allegations surrounding the company’s contracts to expand the offshore loading facilities for Iraq’s crude oil exports. The investigations focus on payments made by subsidiary, Leighton Offshore Pte. Leighton secured a combined $600 million in contracts for Iraq’s South Oil Co in October.

There’s no suggestion that any of Leighton’s other contracts in the region have been brought into question – though Fairfax is reporting that Leighton has had some suspicions about some of its divisions for some time – but it will be hoping that its employees will be either exonerated or dealt with quickly.

Fortescue Metals Group, Iron Ore Holdings


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