BREAKFAST DEALS: SAB surprise

Foster's suitor SABMiller has taken its pitch directly to shareholders in a clever move designed to put the pressure on the target's board. The $4.90 a share offer is not realistic but SAB has wrested the initiative away from Foster's and will now most likely have to sweeten its bid a lot less than it might have needed to. Meanwhile, BHP Billiton plans to put QR National under pressure on its home turf with plans to build $1 billion in rail infrastructure, connecting its Queensland coal mines to Abbot Point; Woodside's new boss Peter Coleman's calm, collected manner wins him praise; and a whole lot of Australian LNG looks destined for South Korea as Shell and Total sign deals collectively worth $84 billion with Kogas. In other news, Brambles put its Recall business on the block and prospective suitors may need to pitch their offers well north of the $2 billion mark. Elsewhere, Fairfax Media may have found a suitor willing to buy all of its radio business and Woolworths hires a heavy hitter from Tesco to replace Greg Foran.

SABMiller, Foster's

SABMiller's decision to go hostile on Foster's is not really surprising given that the target's management has made it pretty clear from the start that a $4.90 bid is just not enough. However, there were two interesting elements in SAB's move yesterday. Firstly, there was no sweetener attached to the $9.5 billion offer to dazzle Foster's shareholders, and secondly, the suitor decided to play its hand before Foster's delivered its annual results. These results are not expected to make pleasant reading and SAB was widely expected to make its move after that. While surprising, there is sound strategic logic behind SAB's move because it has wrested the initiative away from John Pollaers, putting him on the defensive, as he presents the company's numbers next week. Instead of spruiking the value of a new look Foster's forging its own path, Pollaers will now most likely be beset by calls from shareholders to engage with SAB. The $4.90 a share offer is clearly inadequate – Foster's knows this, its shareholders know this and so does SAB – but as mentioned in this column earlier the question is how much sweeter is SAB willing to go? As things stand, SAB's hand has been bolstered by the lack of a counter-bidder putting its hand up to join the race and Foster's share price easing back towards the $4.90 bid price. SAB would also no doubt point out that the target's shares would realistically be trading around the $4.20 mark if it wasn't for its indicative pitch three months ago and the global markets have hit a downward curve since then as well. The hostility from SAB is designed not to push the $4.90 a share offer down shareholders' throats but rather to force Foster's management to engage. Unfortunately for Pollaers and his team, three months of silence can mean a big difference in what SAB's final offer is going to be. While a $6 a share offer seemed likely earlier, the best they can hope for now is somewhere around the $5.30 to $5.50 a share mark. Whether Pollaers decides to go with that or close the door on SAB for good will depend on how much leverage Foster's shareholders will be able to bring to bear on their board. Meanwhile, Foster's has appointed James Doherty as the managing director of its international beer division. Doherty, who starts on August 29, will be responsible for all of Foster's international operations including North America, Europe, Asia Pacific and the African and Eastern joint venture in the Middle East.

* Foster's has now predictably rejected SABMiller's offer, saying that the offer price of $4.90 per share significantly undervalues the company in the context of a change of control. The management has added that conditionality entailed in the offer further detracts from the proposal. Foster's is being advised by Goldman Sachs, Gresham and Allens Arthur Robinson.

BHP Billiton, QR National

BHP Billiton is looking to turn the heat up on QR National on the coal hauler's home turf, with the mining giant reportedly planning to build a $1 billion railway connecting its coal mines in central Queensland to the port facility at Abbot Point. According to The Australian Financial Review, BHP is seeking government approval to essentially duplicate the existing infrastructure of QR National as it expands its coking coal business in the state. The move would see the miner go head to head with QR National, which derives 40 per cent of its business in Queensland from BHP. According to the paper, building the new infrastructure will reduce BHP's tax burden under the proposed resources rent tax and give it complete control over its mines and associated infrastructure. However, it's still hard to see why the miner would want to replicate something that's already there and if the other big miners start building their own rail lines, citing tax benefits under the resources tax regime, then that could mean bad news for QR National and Asciano. Alternatively, this could just be brinkmanship and a tactic by BHP to gain the upper hand in its forthcoming price negotiations with QR National.

Woodside Petroleum, Royal Dutch Shell

Woodside Petroleum's new boss Peter Coleman's conciliatory and calm demeanour has won him much praise as the local oil major posted healthy first-half figures. Perhaps the most striking thing about Coleman's presentation was a distinct lack of the bluster that had been associated with his predecessor Don Voelte. There were no aggressive timetables or new deadlines, just an acknowledgement that Woodside was dealing with the issues plaguing its three LNG operations in a disciplined way. Woodside owns 100 per cent of the $10 billion Pluto 2 project, which has been beset by cost blowouts. It also owns 50 per cent of the $40 billion Browse project, which is embroiled in environmental politics, and 33 per cent of the $15 billion Sunrise project, which has got the East Timorese government hot under the collar. Woodside is in a good cash position and Coleman stressed that the company was happy with its stakes in the projects. However, he has flagged possible changes to those positions down the line. He is also on his way to East Timor in the coming weeks to engage with the government and calm things down there. The overall message here is that Coleman is happy to do whatever he needs to do to get the projects across the line and he is going to be quite diplomatic about the whole thing

Staying with LNG, a whole lot of Australian gas looks destined for South Korea with Royal Dutch Shell and Total SA signing sales deals worth $84 billion with state-owned Korea Gas Corporation. According to a statement from the Korean Ministry of Knowledge Economy, Kogas will buy 3.64 million metric tonnes of LNG a year from Shell's Prelude project for 26 years starting in 2014 and also buy two million tonnes a year from Total's global gas projects, including Ichtys in the Browse basin. The shipments equal 17 per cent of Korea's gas consumption in 2010 and Kogas plans to sign the contracts in September.

Brambles, Recall

Pallet provider Brambles has finally decided to come out and take the step to streamline its structure with the decision to put its document management business, Recall, on the block. Brambles boss Tom Gorman was quick to add a bit of polish to Recall saying that the expected price tag of $1.5 billion is just too low and he is hoping that sale managers UBS and Merrill Lynch will be pushing for a higher price. Interested suitors are probably going to have to make their pitch well north of the $2.5 billion mark and at this point private equity outfits are your best bet to throw that kind of cash around, although industry buyers like New Zealand's Freightways have also been touted. However, current market volatility may delay an imminent sale. For now Brambles can concentrate on further acquisitions of its own and add to its recent buys of reusable plastic-container provider Ifco, airline containers company Unitpool and US-based Container & Pooling. The list of potential targets could include polyethylene containers and pallet provider Euro Pool Systems, Singapore-based Goodpack and rental pallet pooling services company Polymer Logistics.

Wrapping up

Woolworths has made its first senior appointment from outside the company, snaring UK giant Tesco's Tjeerd Jegen to fill the boots of former supermarkets boss Greg Foran. The highly experienced Jegen was running the show at Tesco Malaysia before joining Woolworths. Meanwhile, Asia-focused US-based investment company Matthews International Capital Management has picked up a 5.14 per cent stake in David Jones. In mining news, investors are already trying to line up which miner is going to fit the bill for an acquisitive OZ Minerals, with the AFR reporting that Botswana-focused copper developer Discovery Metals may be a likely target. That is off course unless it decides to move on Sandfire Resources.