BREAKFAST DEALS: PEP talks

The PEP-Spotless bid takes a bizarre turn, and the uranium industry prepares for a year of action.

Pacific Equity Partners' attempt to take over Spotless Group has produced a couple of firsts, most notably the target's management presentation that set an example in boardroom transparency. Now that the saga is dragging on we’ve transitioned from the admirable to the bizarre – PEP has formed an alliance with Spotless’ main union. In uranium mining, things are heating up with China Guangdong Nuclear Power taking a big step towards getting a majority of the UK’s Kalahari Minerals, which would trigger a takeover for ASX-listed Extract Resources, and Toro Energy announcing that it’s talking to two Asian players about making an investment. Elsewhere, the Ludowici family looks set to part ways with its mining technology company of the same name after 150 years and Lynas Corp is tipped to announce a funding deal in the order of $100 million.

Spotless Group, Pacific Equity Partners

Spotless Group shareholders should expect yet another development in their board’s ongoing battle to fend off Pacific Equity Partners’ current offer, possibly as early as this week. Major shareholders Orbis Investment Management, Investors Mutual and Lazard are all baying for a board spill motion and The Australian Financial Review says Spotless' board is set to meet this Friday to consider whether to force their detractors into an extraordinary general meeting or allow PEP to conduct due diligence with an offer of $711 million.

It’s becoming an increasingly engrossing battle for control that’s now produced one of the most unusual alliances. The main union concerning Spotless employees, United Voice, has reportedly sided with PEP amid an ongoing struggle with the company’s management. Their complaints have been that employees are overworked and underpaid at a time when Spotless is trying to restructure its model to make costs lower and profits higher. According to The Australian, United Voice’s Michael Crosby says he’d rather deal with a private equity firm, even though the industry has a reputation for cost-cutting and layoffs.

Extract Resource, China Guangdong Nuclear Power

Extract Resources boss Jonathan Leslie might finally have the opportunity to talk about a takeover that actually exists. Extract’s largest shareholder Kalahari Minerals, which has 43 per cent of the register, has been embedded into well-known, long-running takeover discussions with suitor China Guangdong Nuclear Power. With such a high stake in Extract, which owns the Husab uranium deposits in Namibia, it would be the subject of a downstream takeover offer under ASX rules if Guangdong gets a majority of the Kalahari register.

That moment is getting closer. Guangdong’s UK subsidiary Taurus Minerals says it has claimed 30.8 per cent acceptances and pledges for its £632 million ($949 million) offer. If it passes 50 per cent, it would trigger a downstream offer of about $8.65 a share, or $2.2 billion for the whole company.

Toro Energy

While we’re on uranium, Adelaide-based Toro Energy says it’s been speaking to two potential Asian investors interested in taking a strategic partnership or cornerstone equity investment for its Wiluna project. In the company’s quarterly activities report, Toro said the increased movement between the Rio Tinto-Hathor deal and the Guangdong-Kalahari-Extract talks "indicate the major players in the uranium market remain optimistic regarding the future of uranium”.

As such, Toro said it expects a "significant level of corporate activity” throughout this year, in contrast to 10 months ago when the Fukushima Daiichin nuclear disaster checked the ambitions of the nuclear industry severely.

Ludowici, FLSmidth

It looks like Julian Ludowici will part ways with the company that’s been in his family for over 150 years. The ASX-listed mining technology company Ludowici has received a $267 million cash proposal at $7.20 a share from Danish engineering group FLSmidth that has won the unanimous recommendation of the target’s board in the absence of a better offer and assuming the independent expert gives it the thumbs up. With a 106 per cent premium on the table it looks pretty hard to find fault with it, hence the Ludowici family has put its roughly 20 per cent stake in the company behind the deal.

Ludowici has appointed ICS Advisory and Gilbert Tobin to hold its hand throughout the process, while FLSmidth has sought the counsel of FIH Partners for financial matters and Blake Dawson for legal.

Lynas Corp

Many eyes will be on rare earths miner Lynas Corp to see just how big the funding deal they’ve apparently secured is. Lynas went into a trading halt yesterday pending an announcement about "a funding transaction”. The Australian Financial Review suggests that Japan’s Soljitz Corp could be involved, while guesses on the size of the deal have been put at $100 million.

Lynas is currently pursuing a temporary licence to build a processing plant in Malaysia – a meeting with the country’s Atomic Energy Licensing Board is set for next week. The thought has been that, due to environmental concerns, Lynas could find its efforts thwarted until the Malaysian elections are held, which should happen some time this year. That hasn’t helped the company’s share price, which lost a lot of ground in 2011. However this year is starting off quite well, with Lynas shares jumping 26 per cent in just the last four sessions.

AWE, Genting

The managing director of oil and gas explorer AWE has described its latest deal to secure two oil blocks off the coast of Indonesia as "company-changing”. AWE will cough up a total of $US139 million ($132.3 million) for control of the blocks from Malaysia’s Genting. The Malaysian company will pick up $US39 million for the privilege, while another $US100 million will go towards the loans and receivables of two other players with production-sharing deals for the project.

Managing director Bruce Clement says the deal is a good fit for AWE, with an undeveloped 76 million barrel oilfield the main target. But of course, it’s getting the stuff out of the ground that becomes the most immediate challenge and development costs have been put at $600 million. No matter, says Clement, they’ll find the cash. The market wasn’t too sceptical with the shares jumping almost 5.5 per cent on the news.

Wrap up

Hastings Diversified Utilities Fund might have drawn the ire of suitor APA Group for not putting an independent expert’s report in its target’s statement, but the pipeline owner mightn’t be out of line in its calls for a higher offer. APA Group currently has $2 a share on the table for the shares it doesn’t already own, valuing the target at $1.8 billion in total, but The Australian reports UBS believes they might have to bump that offer up to $2.45.

ASX-listed drilling fluids provider Imdex has announced its joint-venture with DHS Oil Holdings has agreed to pick up a US-based oil and gas surveying company Vaughn Energy Services for $US100 million. Still in resources, Resource and Investment NL has finalised the terms of its deal to purchase Grosvenor Gold from BlueCrest Mercantile Master Fund, announced earlier this month. In return, BlueCrest will receive $35 million, of which $20 million will be in cash and $15 million will be in the form of R&I shares. Elsewhere, Trafford Resources has picked up $7.4 million from the sale of shareholdings in Robust Resources.

Rubber products maker Ansell has signed a multi-year agreement with Koreca Industries, a Korean hand protection company, that will see it become the exclusive distributor of some of Ansell’s products. The Australian company added that it has the option of making equity investments in its new friend, so watch this space.

Finally, Australasian consumer goods company McPherson’s has ticked off all the conditions of the Cosmex International acquisition, with the sale now completed for $5.8 million.