BREAKFAST DEALS: Qantas qualms

Qantas demands Virgin foreign ownership review, while FLSmidth finally ties up Ludowici after the Takeovers Panel steps aside.

Qantas Airways can’t keep pursuing unsuccessful Asian super-premium strategies while allowing rival Virgin Australia to dance playfully with the foreign ownership cap that so thwarts the flying kangaroo’s ambitions. Qantas has little choice but to make Virgin earn its spin-off exercise that will put its international arm closer to the hands of foreign investors. Meanwhile, Gina Rinehart can rest a little easier with South Korea’s POSCO apparently unconcerned by her family troubles. Elsewhere, Gunns has apparently managed to strike up a conversation with a potential new investor, Denmark’s FLSmidth can officially breathe a sigh of relief with rival Ludowici suitor Weir Group dropping out of the race, and Clive Palmer is talking about supporting local independent media, again.

Qantas Airways, Virgin Australia

Qantas Airways chief executive Alan Joyce needs a strategy to rescue his airline’s bleeding international operations, but for the moment the flying kangaroo is focused on blocking Virgin Australia’s flight path. Qantas is demanding a review of Virgin’s ownership restructure that will see its international business shift to an unlisted entity. The restructure has three weeks to go and Etihad Airways boss James Hogan has made his desire for a stake pretty clear, while Air New Zealand is considering its position.

Qantas general counsel Brett Johnson has suggested that Virgin’s restructure might not comply with the Air Navigation Act, the same act that’s the bane of Qantas’s existence by requiring no more than 49 per cent foreign ownership. "Qantas is very concerned that the proposed structure is likely to result in foreign persons having effective control of the day-to-day operations of [Virgin’s international business],” said Johnson.

Maybe so, but that won’t stop the international arm of Qantas losing hundreds of millions each year.

Hancock Prospecting, POSCO

Gina Rinehart mightn’t be able to repair her relationship with three of her four children, but South Korea’s POSCO is confident that it’s planned $1.5 billion investment in the Roy Hill iron ore mine will be sealed. As we all know by now, Australia’s richest person is in a heated battle with three of her four children over control of a family trust, set up by her father Lang Hancock, that holds 25 per cent of Hancock Prospecting. If the children can eject their mother as trustee, Rinehart will have lost control of 25 per cent of her company.

But POSCO believes that the matter is based on ownership and not the overall strategy of the company. It’s an assumption that’s pretty reasonable and one that Rinehart will be glad the South Koreans hold.

Gunns

Shares in Australia’s most famous woodchipper, Gunns, have been holstered (suspended) until March 19, while the company looks to reload with another investor. Gunns told the ASX yesterday that it’s in talks with major shareholders and investment banks over the planned capital raising, but more importantly is also speaking to a "potential new institutional investor”. New Zealand billionaire Richard Chandler was scared off either by environmentalists or the Gunns register – depending on whom you believe – and securing another shareholder is vital for the timber company to stop thinking about debt and start thinking about getting the Bell Bay pulp mill up and running.

Ludowici, FLSmidth, Weir Group

Shareholders in mining equipment company Ludowici are unlikely to have the most rigid views on the integrity of Australian takeovers law after Danish firm FLSmidth secured the company for $11 a share, or $388 million in total. After the Takeovers Panel ruled that it would not prevent FLSmidth from registering a higher offer than the $7.20 that chief executive Jorgen Huno Rasmussen said would not be increased, rival bidder Weir Group was left out of breath with a bid of $10 a share.

In short, the panel decided that it was naughty for FLSmidth not to correct the statement made by Rasmussen in a Reuters interview, but that his comments didn’t amount to a ‘last and final statement’. So Ludowici shareholders will collect $11 for each share that was trading at $3.50 before the takeover speculation emerged. Some speculators will have been caught out however, with the company’s stock rising as high as $11.45.

Brockman Resources, Wah Nam International

Brockman Resources deputy chairman Warren Beckwith is reportedly very confident that majority shareholder Wah Nam International will secure more than 80 per cent of the company and eventually get to 90 per cent and compulsory acquisition. Wah Nam, which owned 55 per cent of Brockman before its cash and scrip offer of $1.50 and 18 Wah Nam shares, is stuck at 73 per cent of Brockman’s register and last week announced that its 80 per cent minimum acceptance condition would be waived this Friday (March 16).

Speaking to The Australian, Beckwith said he expects the register to respond favourably once the condition lapses for Wah Nam’s bid, which comes recommended by the Brockman board.

Toll Group

Australian infrastructure company Toll Group is reportedly set to withdraw from a $145 million Cambodian railways project that’s been mired in controversy. Fairfax brings word from sources in Cambodia that Toll is poised to break ties with a joint venture partner to rebuild and operate the railways that link the capital of Phnom Penh with a port on the Thai border. Claims have consistently stated that families being uprooted to make way for the construction have not been properly compensated.

Wrapping up

Australia’s mining billionaire (or maybe not, says Forbes) Clive Palmer says he’s looking "very strongly” at media investment, according to The Australian Financial Review. The newspaper quotes Palmer on the topic of a possibly Guardian-style blind trust for independent journalism, just a few days after Treasurer Wayne Swan took on Palmer, Gina Rinehart and Andrew Forrest for having too much influence. Given that the big-talking Palmer has also spoken about taking a big stake in Fairfax directly, we’ll have to wait and see what he actually does.

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