Breakfast Deals: Trust issues

Latecomer IOOF looks like one front-runner to take over The Trust Company, while Nathan Tinkler's assets may now be worth $50 million.

As the competition watchdog nears a decision on Perpetual’s proposed takeover of The Trust Company, another bidder has entered the fray – IOOF. The market is offering some insights as to who is in the box seat in what is now a three-way battle. Elsewhere, Nathan Tinkler sees another asset go down in flames, the ACCC clears a renewal of Virgin’s deal with Air New Zealand, there’s further uncertainty at Billabong, Australia’s IPO drought nears breaking point and major deals overseas imply a more bullish business environment.

IOOF, Perpetual, Equity Trustees, The Trust Company

The list of suitors for The Trust Company has grown to three after IOOF threw its hat in the ring for the financial trustee. It now looks like a deal of some sort will go through one way or another over $220 million, with Perpetual and IOOF considered frontrunners ahead of initial bidder Equity Trustees, which doesn’t have the financial clout of the other two suitors.

Investors were giddy with excitement, with news of a fresh bid sending stock in Trust close to a new 52-week high yesterday, up over 12 per cent on the day on high volumes. The upward move for Trust was obvious, but the markets may have also offered a hint as to which company it believes will gather control.

On the day, Perpetual lifted almost 1 per cent, Equity Trustees gained 2 per cent, while IOOF drifted 2 per cent lower. When companies make a bid for anything other than a distressed bargain basement rival, their share price typically falls, as indeed Perpetual’s did when it first announced the deal with Trust.

As such, investors appear to be suggesting IOOF is the favourite, given its share price retreat. An enhanced bid from Perpetual is not considered likely as otherwise this would presumably have weighed on its share price.

Meanwhile, Equity Trustees may be largely out of the running but is profiting from the fact it already has 13 per cent of Trust and a new bidder only helps its return on that investment.

For now, The Trust Company and Perpetual are running the ruler over the IOOF proposal and if the former decides it’s a better deal, then Perpetual will have three business days to respond as per its agreement with Trust.

In the meantime, the ACCC is working toward a final deadline for its ruling on the Perpetual proposal. At the moment that is September 19 and given it raised concerns after a preliminary review, there is a risk it will seek to block Perpetual’s plans. IOOF should have no such worries.

Nathan Tinkler, Aston Metals

Nathan Tinkler’s year is going from wretched to worse, with news the receivers have been called in at his Aston Metals mining group.

Aston owns five resources projects near the mining hotspot of Mt Isa in Queensland, but a failure to pay its debts has seen FTI Consulting brought in to offload Aston’s assets.

Mining magnate Tinkler has kept personal bankruptcy at bay but his assets are steadily slipping away from his grasp. This year he has abandoned his horse racing empire, gave up his prized stake in Whitehaven Coal, and watched his paper fortune dwindle. Aston was the largest mining asset he had left in his control and according to Fairfax, his remaining assets may now be worth around $50 million – and that’s reportedly being optimistic.

Indeed, the wealth of the former young rich lister went quickly, but rest assured little cash was wasted on the Aston Metals website.

Virgin, Air New Zealand, Etihad, Qantas, Wesfarmers, David Jones

The ACCC has given the all clear for Virgin and Air New Zealand to continue their trans-Tasman alliance through until the end of October in 2018. The length of time is welcome for the two airlines, which had sought five years but were at risk of receiving just the three years proposed by the ACCC back in June. The companies were, however, unable to shake the condition to maintain a base level of capacity on six specific routes, due to competition worries.

“The alliance will allow the two airlines to offer enhanced products and services, such as new frequencies and increased access to loyalty program benefits and lounges. This is likely to promote competition on trans-Tasman routes, particularly for business travellers,” ACCC Commissioner Dr Jill Walker said.

The news comes just a day after ACCC chair Rod Sims expressed concern about recent comments from Qantas chief Alan Joyce suggesting the domestic price war was nearing an end. Expect to hear little more on that, but Qantas is in the news for other reasons.

The national carrier, along with retailer David Jones, is considered a likely candidate to pursue a similar securitized lease deal as the $304 million one successfully completed by Wesfarmers-owned Bunnings this week, according to The Australian.

Billabong

Breakfast Deals mainstay Billabong just can’t catch a break. The latest development sees 5 per cent shareholder Coastal Capital threatening to chase a board spill. Coastal has described Altamont Capital’s offer as “extremely unfavourable” and is requesting patience from the board to assess other offers, including the late proposal lobbed by Oaktree Capital and Centerbridge Partners.

The surfwear retailer does at least seemingly have an ally in the Australian Shareholders’ Association, which is not supporting the call for the directors to stand down, according to the AFR.

IPOs, Health.com.au, Nine Entertainment, Meridian Energy

The IPO market could slowly be coming back to life. Hot on the heels of the Steadfast and iSelect floats, we could see bigger fish Meridian Energy and Nine Entertainment list while Health.com.au may follow suit in fiscal 2015, according to the AFR. On the latter, it’s hard to get carried away given fiscal 2015 is a year away, but nonetheless it is a sign of growing conviction in the marketplace.

As we’ve reported earlier, NZ-based Meridian is firmly on track for a dual listing but it’s the possible refloat of Nine that will really draw Australian attention. After being rumoured for months, the plan burst into the limelight once more earlier this week with reports from The Australian that Nine boss David Gyngell had flown to the US to drum up support. The paper indicated a plan for listing before the end of the year, but there’s nothing concrete at this stage.

Wrapping up

Moving overseas, and Microsoft has bought Nokia’s Devices and Services business – which includes its smartphone and mobile phone businesses – for a cool €5.44 billion ($A7.91 billion).

Under the subject of ‘Accelerating Growth’, (soon to be ex) Microsoft CEO Steve Ballmer told Microsoft employees via email that the deal is “a bold step into the future” and the “next big phase of the transformation we announced on July 11”. Investors didn’t agree, sending the company’s stock price down over 5 per cent in US trade.

The deal comes quickly on the back of the biggest global deal in the world this year, Verizon’s $US130 billion ($A142 billion) purchase of Vodafone’s 45 per cent stake in the Verizon Wireless business. The major transactions are fresh hints that global market confidence is improving.

In banking, Macquarie Bank has sold out of its wealth management joint venture in India. The stake in Religare Macquarie held by the Australian-based investment bank will be purchased by its partner, Religare. The Indian group has $455 million assets under management and Macquarie’s decision to exit is part of a broader move away from wealth management businesses in Asia. The terms of the deal were undisclosed.

Sticking with Macquarie and the investment bank has reportedly put its hand up for a $150 million mortgage fund loan book that stems from the failed finance house Banksia Securities, according to the AFR.

Meanwhile, Global Infrastructure Partners is reportedly looking to offload its 27 per cent holdings in Port of Brisbane before 2013 is over, with super funds the most likely bidders, according to the AFR.

Back to market moves, and billionaire investor Alex Waislitz is part of a group of investors stumping up cash through entity Thorney Investment Group for a $50 million recapitalisation of ASX-listed Wentworth Holdings. According to The Australian, Thorney has stakes in Fairfax and Wilson HTM and could see value in a restructure of both groups.

And finally, News Corp has sold the Dow Jones Local Media Group, which houses 30 publications, to a subsidiary of Fortress Investment Group. It is largely a group of local and regional newspapers in the US, including eight dailies and 15 weekly newspapers.