BREAKFAST DEALS: Santander faux pas

Comments from Santander's boss sow confusion on NAB's UK strategy, while an announcement on Billabong's takeover talks is imminent.

Utterances from a leading Spanish banking executive have thrown up some big hiccups for investors hoping National Australia Bank investors will be able to get out of the UK. Billabong International suitors should know their destiny within the next day or so. Elsewhere, consolidation talk is back for the dairy processing industry, the market is wondering where the property all went and our only shining all-scrip deal has been dealt a blow.

National Australia Bank, Santander, Clydesdale Bank, Yorkshire Bank

Investors in Spanish giant Santander had better hope their chief executive was joking when she swiped away a question about the lender's reported interest in National Australia Bank's UK business.

Santander has already denied that it engaged in talks with the Australian bank about purchasing assets after a report indicated the lender's executives in the UK and Spain had spoken internally about a potential £2 billion (3.2 billion) offer. Notice how it denied something that wasn't reported.

Now the company's boss Ana Botin has apparently attempted to deflect the question of Santander's interest in National Australia Bank's Clydesdale Bank and Yorkshire Bank in the UK by simply asking, "Who are they?"

"I know they are a Scottish bank and a Yorkshire bank owned by an Australian bank, right?" Botin reportedly said.

The idea of Santander's chief executive being unaware of players like Clydesdale and Yorkshire in a market the company is keen to expand in is positively laughable. This columnist hopes the highly respected banking executive was indeed joking.

If the line was a gag, then Santander can't be seriously as an interested party for National Australia Bank's troubled assets. If it wasn't a joke, it was a poor way of covering up the lender's interest, and the second such instance of Santander delivering a below par PR response.

Either way, this column has never believed Santander to be a serious candidate to purchase Clydesdale and Yorkshire, if for no other reason that it would likely demand that National Australia Bank's boss Cameron Clyne take an acceptable loss on the assets.

This latest episode only strengthens the case that Santander isn't interested. If National Australia Bank is to sell its UK businesses, it'll have to find another avenue.

When last we heard, NAB had reportedly engaged advisors about what to do with the business – as it should. The UK is a disaster zone for lenders.

While it's always been thought that the Australian bank would like to get out of England, especially with the constant chanting from shareholders, it simply won't be able to find a wood buyer.

Clyne may be wearing some egg after failing to fix the UK situation well into the gig, but it's a difficult funk to get out of.

Billabong International, Paul Naude, Sycamore Partners

Billabong International is likely to tell tired shareholders in the next day or so the outcome of its exclusive negotiations with its suitor over a terribly beaten down offer price.

Former Billabong Americas director Paul Naude and New York backer Sycamore Partners won 10 business days of exclusive discussions with Billabong over an indicative proposal at 60 cents a share on April 9. That runs out this evening.

At 60 cents a share, Billabong would be going for $287 million, with the embattled surfer company carrying about the same amount in debt.

Billabong's register isn't confident. Despite a 1 per cent bump on Friday, the stock is trading at 49.5 cents a pop, giving it a market cap of just $237.1 million.

If the structure of the Billabong proposal is maintained, where existing shareholders can stay with the business rather than selling out, the current standing of the share price means the stockholders staying in will be few and far between.

Murray Goulburn, Warrnambool Cheese and Butter

Takeover speculation for Warrnambool Cheese and Butter has been rekindled following the decision by Murray Goulburn to increase its stake in its former takeover target.

Murray Goulburn bumped up its stake to 14.5 per cent from 12 per cent on Thursday at $4.60 a piece, which was a 16 per cent premium to the previous day's closing price. The stock eased back on Friday as investors began to see the situation for what it was.

By doing a $2 billion deal with Coles, Murray Goulburn could very well have sounded the starting bell on a long-awaited period of consolidation in the milk processing industry. Murray Goulburn is on Warrnambool Cheese and Butter's register following a 2010 takeover tilt, which fell over when the Australian Competition and Consumer Commission started sniffing around.

If Murray Goulburn's Coles deal does bring the sector's M&A activity to light, it's very possible that another WCB shareholder, Bega Cheese, could have a crack.

Bega is currently sitting on a 17 per cent stake, with Murray Goulburn able to pick up shares until it reaches 19.9 per cent.

Buying a stake of this magnitude means it will have a seat at the negotiating table if Warrnambool Cheese and Butter is put in play. As yet, it's not seeking a seat at the board room table.

Stockland, FKP Property Group, Australand, CapitaLand

There's a bit of property speculation still washing around, despite hopes of a terrific start to 2013 petering out somewhat.

The Australian believes that Stockland Group is thinking about a strategic partnership with FKP Property Group for its retirement business in an effort to get costs down.

The lack of buyer demand for retirement assets mean Stockland will probably have to drop its preference to sell the business outright and instead make it more efficient.

Meanwhile, things have gone pretty quiet in relation to Australand, which was effectively put up for sale by Singaporean majority shareholder CapitaLand.

The Australian Financial Review reports that the company has failed to identify a suitor for the whole business, despite receiving interest from a number of parties.

It's been four months since GPT first declared its interest for everything except the residential arm.

Wrapping up

In financial services, the Trust Company has officially rejected a merger proposal from Equity Trustees, describing the proposal as an opportunistic play that materially undervalues the company. Pretty standard M&A defence language.

The company's independent expert Lonergan Edwards agreed with the board, meaning that a positive result from a shareholder vote is unlikely to be scoured by Equity Trustees. Unless the suitor improves the terms of the merger, this all-scrip deal (a rarity in today's world) could be undone.

The Australian reports that private equity funds are preparing for an assault on the Australian mining sector, with a variety of players beaten down by worsening sentiment. Without many concrete details, we'll have to wait and see.

Speaking of mining, Barrick Gold is looking for buyers for three of its Australian gold mines, according to The Wall Street Journal. The newspaper rightly points out that Rio Tinto and BHP Billiton are unlikely to be on the list, given that they too are offloading non-core assets.

And finally in telecommunications, Optus has picked up a $60 million contract with security company Suretek to provide assistance on new security solutions over five years.