BREAKFAST DEALS: Pillar building
The fifth force in banking
It would seem that the latest round of bank bashing in Canberra may not just be all empty bluster this time around and the local banking industry, dominated by the big four banks, may have to make room for a new player in their backyard. According to The Age, Treasurer Wayne Swan is set to reveal plans that will see the creation of a fifth player in the sector as the Gillard government flexes its muscles to prove that it's serious about taking the big banks down a peg or two. The report says that Swan is set to provide a helping hand to credit unions and building societies by reopening the recently closed government guarantee scheme on a limited basis. This should provide them with greater access to wholesale funding and ideally put some pressure on the banks in the home lending stakes. The government's plan is also expected to involve the injection of more money into the securitisation market and the expanded use of Australia Post branches for credit union deposits and withdrawals. There was some talk a little while ago of restructuring Australia Post as a stand-alone bank but The Age reports that those plans have been shelved after resistance from the postal service as well as the Treasury. The big four banks have come under sustained political pressure after raising mortgage rates above the Reserve Bank's cash rate rise on Melbourne Cup day and while one can make the case that a lot of the populist vitriol spouted by the politicians is unjustified it looks like this time Canberra apparently means business. The big four would no doubt have been gearing up for some sort of action so it will be interesting to see just how big a fuss they are willing to kick up once the plans are released.
Nufarm
Nufarm management probably had an inkling that its week full of positive news was going to sour sooner or later. As it turns out the agrichemicals producer has received a reprimand from the Australian Securities and Investments Commission (ASIC), which has slapped a $66,000 fine on the company for its less than satisfactory disclosure practices. Nufarm has agreed to a range of undertakings demanded by ASIC but it wasn't exactly contrite saying that its actions were "not an admission of liability" but given how loose and fast the board has been with the information it's frankly lucky to get away with the penalty it has copped from the corporate regulator. It's been an eventful week for Nufarm which has managed to win back the love of some brokers and analysts after locking in a new $900 million dollar facility from its lenders to tackle its debt situation and then there was the resignation of deputy chairman and non-executive director, Doug Curlewis. While Curlewis has denied that his departure is directly linked to the strategic review currently underway at Nufarm many in the market are saying that it could mark the beginning of a long awaited shake-up at the company. However, Nufarm shareholders hoping to hear some more on that front at today's annual general meeting may be disappointed today. Nufarm's management will most likely use the AGM to spruik the latest refinancing success and improving analyst forecasts but the disclosure issue goes to the heart of what many have pointed out as the fundamental flaws in how Nufarm is run. ASIC's penalties may not be punitive enough for some but it does provide the necessary ammunition for law firms Slater & Gordon and Maurice Blackburn to sharpen their knives against Nufarm's management and that's something the company's shareholders should bear in mind at today's meeting.
Aston Resources, Port Waratah Coal Services
Nathan Tinkler's Aston Resources is less than impressed with how the export loading allocation game at the port of Newcastle has played out. The recently listed coal mine has received an allocation of around 1.7 million tonnes of export capacity in 2013 and 10.5 million tonnes from 2015 onwards from the operator Port Waratah Coal Services (PWCS). However, Aston CEO Todd Hannigan said that the allocations handed down by PWCS highlighted just how skewed the conditions were against local minnows. Hannigan has a good reason for being upset, Aston had sought an allocation of 2 million tonnes in 2012, 5 million tonnes in 2013 and 10.5 million tonnes from 2014 onwards. He also bemoans that the capacity allocation arrangements only strengthen the grip of the incumbent producers who lock up excess growth capacity at the port but he is not giving up without a fight. Aston is set to ask the Australian Competition and Consumer Commission (ACCC) to review its approval of a 2009 agreement on capacity allocation at the port and will now seek talks with other producers to secure the extra port capacity it needs to meet its 2012 export targets.
ATO's hardline on private equity
The Australian Tax Office (ATO) has held firm on its line to treat the gains made by private equity operators from asset sales as income rather than as a capital gain. The decision comes a year after the ATO slapped TPG with a $452 million tax bill after the private equity firm sold its Myer shares. The ruling at the time attracted a substantial amount of criticism from those who said that it would damage Australia's attractiveness as an investment destination. That fear was still palpable yesterday with many maintaining their line that the ATO's hardline will stifle investment. However, a year on from the stoush between the ATO and TPG, private equity activity in the local markets is back with a bang. US private equity firm Kohlberg Kravis Roberts (KKR) made a $1.75 billion offer for local funds manager Perpetual in October and TPG, together with fellow private equity firm Carlyle Group, has successfully bought private hospitals operator and pathology provider Healthscope for $1.99 billion. Foster's wine business along with a number of other targets in the food, agriculture and infrastructure have all appeared on the private equity radar in recent months. So it would seem that Australia still remains an attraction for private equity despite the tax considerations.
Wrapping up
Mid-sized broker Shaw Stockbroking is under a cloud after the departure of its long-time managing director and substantial shareholder Harold Shapiro. According to The Sydney Morning Herald, Shapiro, who has put his 27 per cent stake in the brokerage on the block, decided to leave after failing to see eye to eye with the board over bonus payments made to the firm's new management as well as stalled merger talks that were designed to bring in a new cornerstone investor. Shapiro's stake is worth around $4 million. Meanwhile, there was finally some closure for investors burned by the collapse of Geelong-based Chartwell Enterprises, with former company director Graeme Hoy set to plead guilty late next week to as many as 47 charges. Hoy had originally pleaded not guilty to 204 charges and was expected to face trial next year. Hoy's partner in crime Ian Rau is already serving time after being sentenced to 18 months behind bars in August. MLC, the wealth management arm of National Australia Bank, has mopped up the remaining stake in financial advice business Meritum Financial Group. MLC had earlier acquired 49 per cent of Meritum as part of its acquisition of Aviva Australia. Perilya has extended its $187.7 million takeover bid for Canada's GlobeStar Mining Corporation by 10 days so it can mop up the remaining shares in the target that it doesn't already hold. The offer was slated to close on November 30, but will now close on December 10. Finally, US rail company Genesee & Wyoming (G&W) yesterday has completed its $334 million takeover of FreightLink's Adelaide to Darwin business. G&W launched its offer in June this year.
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