Breakfast Deals: RHG race

RHG shareholders are tempted by an all-cash offer while BlueScope scores a win behind its share price rout.

There’s disquiet on the RHG register about whether to make a bet on Cadence Capital’s scrip or to take the Resimac money and run. Elsewhere, BlueScope scores a win behind its share price route, RATCH-Australian confirms its spot on the Macquarie Generation start line and ASIC is taking the rise of hybrid issues very seriously.

RHG, Pepper Australia, Cadence Capital

Some RHG shareholders, who have two takeover offers on the table, are showing some resistance to the idea of replacing scrip with scrip when there’s cash on the table.

Pepper Australia and Cadence Capital’s joint cash-and-scrip offer for RHG, formerly known as RAMS Home Loans, is going up against an all-cash offer from Resimac.

The duo are offering 35 cents a share plus one share in Cadence for every 10 shares in RHG, which adds up to 49.7 cents a share. Resimac is offering 48 cents a share in cold hard cash.

According to The Australian Financial Review, Geoff Wilson from Wilson Asset Management said his preference is for an offer with a “full cash-out” option.

“We’d prefer to make decisions around our money in terms of what assets we want to invest in,” said Wilson, who speaks for 3.4 per cent of the register.

The brinkmanship of scrip offers was looking like a bit of a lost art form until recently as shareholders in target companies took the same stance as Wilson. You can’t bank on scrip in a sour market.

Add to that the reality that Cadence’s register doesn’t turn over very quickly and shareholders mightn’t be able to realise any gains in good time.

But there’s another formidable shareholder on the register…Pepper-Cadence.

The two bidders lodged a joint substantial shareholder notice to the ASX yesterday showing they speak for 17.1 per cent of the company.

It’s certainly not enough to lock the bid in, but it’s enough to cause some mischief if they want to.

BlueScope Steel, Hills Holdings

Behind the 16 per cent dive in the BlueScope Steel share price thanks – to a disappointing outlook – was news that the company actually chalked up a small win.

BlueScope has beat out Fletcher Building in the race for Hills Holdings’s Fielders and Orrcon steel products business for $87.5 million in cash.

Chief executive Paul O’Malley said the acquisition was representative of a likely period of change in the steel industry, which, to put it mildly, is going through some difficulties.

“I think there are a lot of small players, a lot of customers are doing it really tough, and I think there is a lot of opportunity for significant restructuring to occur in the industry,” he said.

There was little focus yesterday on the acquisition because BlueScope issued a disappointing outlook. Investors smashed the company in spite of the fact that it has gone from a $1 billion in 2011-12 to an $84 million loss in 2012-13.

Shareholders were hoping that the turnaround continued at breakneck speed.

Macquarie Generation, RATCH-Australia

Thailand’s RATCH-Australia has reportedly confirmed its submission of an expression of interest for Macquarie Generation, pitting it against AGL Energy and ERM Power in the battle for the NSW heavyweight.

The Australian Financial Review reports that RATCH is working with a partner on a potential offer, which could have to be as high as $2 billion if it wants to win the day.

“We’re keen to participate in all of MacGen,” RATCH executive general manager of business Geoffrey Dutton said according to the newspaper. He declined to name who the partner is.

Yesterday was the deadline for submissions of interest in the largest component of the NSW government’s current electricity privatisation process.

Governments around Australia are looking at their books to see if privatisation drives could generate enough coin to pay down some of their debt loads.

In the same was as every strong IPO lends support to the next float aspirant, every solid-state government asset sale gives the next one in line a bit of a boost.

The main difference is that privatisation of state-owned assets can carry a political price.

Australian Securities and Investments Commission and hybrids

The Australian Securities and Investments Commission (ASIC) is reportedly poised to announce a crackdown on the $18 billion boom in ‘hybrid’ financial instruments.

According to The Australian, the corporate regulator’s Melbourne-based commissioner John Price will issue a warning today (Tuesday) to buyers, especially the self-manager superannuants, to be wary of treating these investments in the same manner as a bank deposit. They’re not the same, despite some of the advertising.

While ASIC was keeping quiet yesterday, the newspaper understands that chairman Greg Medcraft, a former investment banker, has compared hybrids to collateralised debt obligations.

Given the significance of CDOs in the global financial crisis, the after-effects of which are still painfully obvious to us all, ASIC is clearly treating hybrids with a high degree of caution.

Wrapping Up

Mining giant Rio Tinto has continued to prune its portfolio by selling its interests in the Mt Davies nickel deposit joint venture for the bargain basement price of $500,000.

Minerals explorer Metals X has picked up the interests, claiming that there’s significant potential to develop the sites despite the state of global nickel markets.

Elsewhere, packaging giant Amcor is continuing to sell the benefits of its demerger plans.

The giant said its packaging distribution business will continue to improve on the back of cost savings in the lead up to the $2 billion split that will form a separately listed company called AAPD.

Amcor has left shareholders very happy in 2013. The stock is up 30 per cent and investors love value-unlocking demergers.

And finally, Eureka Funds Management has reportedly emerged as the leading suitor for the Australia Post headquarters in Sydney’s Strawberry Hills.

The expected sale price is around $170 million, according to The Australian.

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