BREAKFAST DEALS: Slicing up Goodman

Speculation mounts about the source of a 10 per cent share raid on Goodman Fielder, while QBE prepares for a new era of leadership.

Australian food companies have been in the eyes of foreign players for some time, but it’s worth considering whether the share raid on Goodman Fielder – by what is suspected by the breadmaker to be a well known Singaporean player – is particularly opportunistic. Chairman Max Ould thinks it could very well be Wilmar International that’s picked up shares that have lost 60 per cent of their value over the last 12 months. Meanwhile, the acquisitive Frank O’Halloran is reportedly set to step down from QBE; what will that mean for Australia’s largest, and eternally hungry, insurer? Elsewhere, Billabong International officially gives TPG Capital the thumbs down, at least at $3 a share, Exxaro has finally secured African Iron with Equatorial Resources handing its 20 per cent stake over and James Packer has gone on radio to talk Echo Entertainment.

Goodman Fielder, Wilmar International

Goodman Fielder chairman Max Ould has reportedly shared his strong suspicion that the source of the share raid for 10 per cent of the company – conducted by UBS – is from Singapore. The Australian Financial Review says Ould believes Wilmar International might be behind the $84 million raid and, if that’s the case, he expects a full takeover offer for the breadmaker.

After a two per cent bump in the share price yesterday to 51.5 cents a pop, Goodman’s value is sitting at $1 billion. But the newspaper says Wilmar was picking up shares at 60 cents a piece, which would equate to a market value of $1.17 billion. Wilmar, which acquired Sucrogen, the sugar division of CSR, for $1.75 billion about a year ago, would have to bid at least 60 cents a share to have a shot at winning over shareholders.

But then again it’s very early days and there’s a conflicting report from The Sydney Morning Herald where sources indicate this is a defensive stake.

QBE Insurance

Questions will no doubt be asked this morning about the acquisitive nature of Australia’s largest insurer, QBE insurance, amid news that it’s legendary long-time chief executive Frank O’Halloran is stepping down. The Australian reports that O’Halloran is tipped to announce his departure this morning, with global head of underwriting John Neal set to be named his successor.

The newspaper indicates that this is part of an orderly transition that’s been in the works for some time. Given that O’Halloran has never shirked from his conviction that, despite the company’s recently depressed share price, down 38 per cent over the last 12 months against an 11 per cent drop by rival Insurance Australia Group, QBE is still on the acquisition trail. Perhaps, like the more measured approach from new Woodside Petroleum chief executive Peter Coleman compared to the 'crash and bash' reputation of predecessor Don Voelte, investors will be looking for a more temperate method.

Although it should be pointed out that while QBE shares have struggled over the last year, O’Halloran will leave the company as a revered figure. Despite being an insurance company that went through the global financial crisis, QBE shares have increased 46.5 per cent over the last decade, which is double that of the benchmark index, while IAG shares have remained almost dead flat.

Billabong International, TPG Capital

Surf clothing company Billabong International has officially rejected a $765 million, $3 cash per share, takeover proposal from private equity firm TPG Capital – oh dude, like… bummer. Billabong said in a statement that after looking over the proposal with its advisers – Goldman Sachs for financial, Allens Arthur Robinson for legal – the price tag wasn’t high enough to justify a change of control despite being almost a 70 per cent premium to its trading price before the TPG news broke.

Billabong also said that founder Gordon Merchant, who personally controls almost 15 per cent of the register but influences much more, wouldn’t accept an offer of $3 a share. That statement dropped as the market opened and the stock actually rose with investors hoping for a higher offer either from TPG, Kohlberg Kravis Roberts which is said to have spoken to a syndicate of banks, or maybe Archer Capital which has reportedly taken a look. All those players are private equity and not known for bidding wars.

Exxaro, African Iron, Equatorial Resources

South Africa’s Exxaro has finally secured African Iron with Equatorial Resources handing over its 20 per cent stake for $65 million. This crucial event pushed Exxaro’s stake in the company above 75 per cent, so now an extra 6 cents a share will go to shareholders, on top of its 51 cents a share bid, which gives the company a total value of $338 million. Now Exxaro can focus on developing the Mayoko iron ore site in the Republic of Congo.

There were some nervous moments there when the South African firm hadn’t secured a simple majority the day before its offer was due to expire. Having done the business with little time to spare, Exxaro’s offer was extended for another two weeks while shareholders could only sit and wait to see if Equatorial would hand over its crucial stake. They can now breath a sigh of relief.

Crown, Echo Entertainment

Billionaire James Packer might have found a way to secure a 10 per cent stake in Echo Entertainment for Crown Limited quicker than the market might otherwise have expected, but he’s been out on talkback radio to dispel the perception that he’s lacking transparency. Packer spoke to Alan Jones on Sydney’s 2GB, saying that Echo’s casino licence is essential for his plans to create a $1 billion hotel/casino that caters to high-rollers.

Fairfax brings word from sources that say Packer wants control of Echo to create a member’s only style club in the image of Crown’s Mahogany Room, with Packer himself warning publicly that wealthy Asian gamblers won’t come unless the facilities are hot to trot.

Gunns Limited

Seemingly permanently embattled timber company Gunns Limited is still aspiring to construct the fabled Bell Bay pulp mill amid a massive slump in profit and revenue. Yesterday, Gunns booked a $173 million first half loss and a 40 per cent slide in revenue to $217 million. Impairments, asset writedowns and the Australian dollar were the culprits. Gunns is till trying to sell some assets, including the Tasmanian and Green Triangle plantation lands, some sawmilling operations and managed investment scheme loan books.

"The future value of Gunns is clearly driven by the completion of the pulp million project,” chief executive Greg L’Estrange told investors during yesterday’s results presentation. The project was first proposed over seven years ago. L’Estrange emphasised how the proposal from Richard Chandler Corporation, based in Singapore, would enhance the timber company’s balance sheet, a crucial development in the lead-up to the final investment decision on the pulp mill.

Coopers Brewery

Australia’s largest locally owned brewer, the unlisted and proudly South Australian Coopers Brewery, can now boast a confident group of investors after a share buyback plan was comprehensively rejected by the shareholders. According to Fairfax newspapers, the 2.5 per cent share buyback program that Coopers launched late last year has netted just 0.55 per cent of issued capital – obviously, shareholders believe Coopers can brew a better return than they can. The brewer had to opt for a similar move six years ago to fend off a bid from Lion Nathan, which is now owned by Japan’s Kirin Holdings.

Wrapping up

The quest to snare Port Botany from the NSW government is reportedly being taken up by all and sundry. The Australian Financial Review believes that up to 30 global funds are in talks to establish consortiums capable of putting up a $2 billion bid. Some of the names being thrown around are the Ontario Teachers’ Pension Plan, Morgan Stanley Infrastructure, The Carlyle Group and Victorian Funds Management.

Investors in oOh!media agreed to hand the remaining 80 per cent of the outdoor advertising company over to CHAMP Private Equity yesterday through a scheme of arrangement worth $175 million. The vote was almost unanimous.

TRUenergy has lodged plans to construct a wind farm with the South Australian government and flagged another idea of developing a gas-fired power station near Sydney, Fairfax newspapers report. The plans come amid expectations that TRUenergy's parent company CLP Holdings, based in Hong Kong, will launch the energy retailer onto the sharemarket in the second half of this year.