Breakfast deals: UGL's detached property

UGL is expected to announce today that it’s going with the demerger plan that Goldman Sachs has been looking into. Rio Tinto’s decision to put the brakes on its Pacific Aluminium sale is actually a prelude to much bigger selling plans, according to the speculation. Elsewhere, Tom Waterhouse has sold to a UK bookmaker – just not the one we originally thought – and, could SingTel be shifting its Optus Satellite plans?

UGL, DTZ

UGL chief executive Richard Leupen is set to pull the trigger on the company’s demerger of its engineering and property businesses.

With its annual results set for today (Monday), UGL is expected to officially announce that after four months of consideration, the demerger of its DTZ property business from its engineering business will be given the green light. Goldman Sachs has been conducting the business ‘review’.

Investment bankers have been pushing the demerger angle on a handful of companies lately as a way of unlocking value, and UGL has been a particular target of such enthusiastic advice, with its share price falling 32 per cent so far this year.

In mid-May, UGL stock tanked 17 per cent following the company’s second downgrade for 2013.

Brambles is of course the poster child for the demerger case. The pallet company tried and failed to find a trade buyer for its US document management business Recall. Ultimately, it went for a demerger after the offers that were drawn up didn’t impress.

Then there’s Amcor, which announced earlier this month that it’s spinning off its $3 billion Australian and New Zealand packaging and global distribution business into a new company.

Rio Tinto, Pacific Aluminium

Speaking of spinoffs, the decision by Rio Tinto boss Sam Walsh to abandon the sale of Pacific Aluminium has led to speculation that this is a precursor to shaving off the aluminium division in its entirety.

During the announcement on Thursday, Walsh was asked whether the aluminium had a place in the Rio portfolio and he let that one go through to the wicket keeper (unlike Cook and Trott off the bowling of Harris!).

Credit Suisse, UBS and Commonwealth Bank all jumped on the lack of clarity on the matter as a signal that perhaps Walsh could have even greater ambitions than his predecessor Tom Albanese.

“Pacific Aluminium's reintegration within Rio Tinto Alcan does raise the question as to whether an initial public offering and partial selldown is a future possibility,” said Credit Suisse analyst Paul McTaggart.

This would fit somewhat awkwardly with some of the noises we’ve heard from Walsh over the last few months.

“I think the market was aware that PacAl was not going to sell,” Mr Walsh told reporters last week.

“I’m a realist, I’m a pragmatist: Let’s get on with life. Running two aluminium businesses within one organisation – that’s not all that productive.”

Then there are the more bullish comments he made about aluminium in his interview with the UK’s The Telegraph in June about how other Asian countries and Africa will help pick up some of the China demand slack.

“That will provide continuity for our business. The sort of things we supply, there are no substitutes. If you want to urbanise, industrialise, you need steel, you need copper, you need aluminium.”

You could make the argument that it’s perfectly reasonable for a CEO to talk up the prospects of a business without maintaining a long-term commitment to it. Someone else might like it more than he does.

But it would be quite an effort to sell a business of that size after almost two years of searching for a buyer for Pacific Aluminium and coming up with bubkes. 

Tom Waterhouse, William Hill

Tom Waterhouse has put an occasionally troubled year behind him by selling the online betting website that carries his name to British bookmaker William Hill for up to $110 million.

William Hill will hand over $30 million for the website and $6 million to cover the bookmaker’s debt up front. It will then deliver $70 million down the track, depending on whether the business delivers earnings of $10 million to $30 million in 2015.

William Hill chief executive Ralph Topping said that there was “no intention” to remove Waterhouse as the face of the business in the near term.

Waterhouse in a sense became the face of online gambling when community concerns about the presence of advertising for online betting during sports broadcasts garnered the attention of federal politics.

When Topping visited Australia in March he played down the prospect of a takeover of the Waterhouse business, a name synonymous with Australian horseracing, and it was subsequently reported that the UK’s Ladbrokes was interested at $200 million. This was denied.

Wrapping up

Speculation that the struggling Adelaide-based Astra Resources could be pushing towards a multi-billion dollar European float hit a big roadblock over the weekend.

The Australian reports that an analysis of the two exchanges that Astra is supposed to be targeting, GXG Market and Frankfurt Stock Exchange, reveals that the company would be unlikely to meet the listing preconditions relating to revenue and profitability.

Speaking of IPOs, The Australian Financial Review has raised the prospect of Singapore Telecommunications floating its Optus Satellite business. Apparently the last round bids could be falling short of the $2 billion price tag and, given the increasing interest in Australian floats, it could be a really good option.

Elsewhere, FKP Property took a $187.9 million hit on Friday in its non-retirement properties in the lead-up to asset sales designed to transform it into pure retirement play.

And finally, Rural Equities and interests associated with the prominent Cushing family have built a 17.7 per cent stake in ASX-listed agribusiness company Tandou.