BREAKFAST DEALS: Wanting Woodside
Royal Dutch Shell, Woodside, BHP Billiton
Royal Dutch Shell's decision to sell down a 10 per cent holding in Woodside Petroleum sent pulses racing across the market after the shock $3.3 billion sale effectively made the Perth-based oil and gas company a viable takeover play. Shell has also indicated that it is willing to offload its remaining 24 per cent stake in Woodside as it switches focus to its burgeoning direct interests in the local oil and gas sector. The global oil major nabbed Arrow Energy in April, has a substantial stake in the Gorgon LNG project and is working to develop its Prelude gas field in WA. While the 24 per cent stake will be kept in escrow for one year, Shell said that it would sell stakes of three per cent or more to "strategic” third parties and engage with a potential suitor if a full-blooded takeover offer makes an appearance. Shell's holding was long viewed as an impediment for any interested party and its little surprise that the sell down has got punters excited about an impending takeover offer. Perhaps, even less surprising is the fact that BHP Billiton is the number one contender on everyone's lips. Shell and BHP had considered a $35 billion joint bid for Woodside last year before pulling the plug and with the miner still smarting from the rejection in Canada will undoubtedly now keep an eagle eye on Shell's remaining stake. However, it might be a bit premature to expect a swift move by BHP. Instead the miner could take its time and evaluate Woodside's entire asset base which has had its fair share of trouble. While few can argue with the strength of Woodside's North-West Shelf LNG project questions have been asked about the expansion at the Pluto LNG project which is running behind schedule and the issues at the Browse and Sunrise LNG projects. Shell probably gave up any hopes of launching a full takeover of Woodside a long time ago after its 2001 bid was knocked back on national interest grounds and the same imperative will most likely make other foreign suitors a little jittery, as it turns out BHP and Shell's talks last year also stumbled on the issue of regulatory hurdles. BHP is definitely in the mix as Shell slowly unwinds it remaining stake in a company that ticks all the boxes for the miner but analysts are mixed on how soon a full takeover will come to light. The one thing that is not in doubt is the impeccable timing of Shell's move to sell its 10 per cent stake to institutions, which makes the most of Woodside's buoyant share price and the resurgent Australian dollar. The sale at $42.23 was at a discount of 7.9 per cent to Woodside's closing price of $45.86. It was underwritten by UBS with Rothschilds acting as Shell's independent adviser.
Ten Network Holdings
It looks like Ten Network Holdings and its media mogul shareholder James Packer may be close to burying the hatchet with reports that a compromise deal is on its way. By all accounts board room acrimony has seemingly been replaced with constructive resolution and The Australian reports that a final position could be reached as early as today. The latest news would suggest that Messrs Packer and his mate Lachlan Murdoch may have relented on their demands for a third board seat now that Ten executive chairman Nick Falloon is on his way out and we will have to wait and see if Murdoch does get the executive chairman position. While the management changes envisioned by Packer may come to pass the strategic direction of the network under Packer and Murdoch is yet to be seen. Meanwhile, Ten has released the senior executive remuneration details for 2009-10 and The Australian Financial Review suggests that the numbers provide a greater impetus to Packer to ring in the changes at the network. It looks like Falloon pocketed close to $2.8 million during the period, while Ten's chief executive Grant Blackley collected $2.38 million along with a $900,000 payment from former shareholder CanWest Global Communications of Canada. Payments were also made to other Ten executives – including the chief executive of its outdoor advertising company Eye Corp, Gerry Thorley, and chief programming officer David Mott. Ten has not explained why the payments were made to the executives but Packer and Murdoch will most likely carry out a swift slash and burn on executive pay as a part of their planned overhaul.
Healthscope, TPG-Carlyle, Sonic Healthcare
Looks like Healthscope's new private equity owners TPG and Carlyle have wasted little time in ringing in the changes at their latest acquisition, with news of new chief executive and a new chief financial officer set to take the helm at the private hospital operator. Healthscope's current boss Bruce Dixon is now reportedly headed for the exit along with chief financial officer Gary Kent and chief operating officer Vita Pepe. TPG and Carlyle are bringing in some heavyweight talent as replacement with former Mayne Hospitals and Symbion chief Rob Cooke to take Dixon's position while Kent will be replaced by Cooke's long standing number cruncher John Hickey. Both have a solid track record in the healthcare space, having worked hand in hand at Mayne and Symbion. Reports suggest that Dixon and Pepe have chosen to retire but the departure, especially Dixon's, will cause a few furrowed brows out in the market. After all it wasn't that long ago that Dixon was telling The Australian Financial Review how much he enjoyed the competitive cut and thrust of the pathology market, Dixon told the paper in September that he had no immediate plans to retire and the window for his tenure at Healthscope could be in the range of five to seven years. The private equity firms had also professed at the time that it was business as usual and interestingly Dixon had warned that a management change could cause turmoil among the ranks of Healthscope's doctors. Well the management change has come to pass and Dixon said yesterday that the way ahead for Healthscope will require him to commit 7 to 8 years as the CEO, something he is now unwilling to consider. Dixon is a passionate farmer and said that he looks forward to spending more time at his farm in Flinders in the Mornington Peninsula. Both Dixon and Pepe will remain with Healthscope as consultants for the next 12 months.
Meanwhile, pathology and radiology service provider Sonic Healthcare has burst back into the M&A scene after a hiatus of sorts, forking out a bit of cash to pick up independent US pathology business CBL Path (CBL). Sonic has kept a tight watch on its purse strings this year and the company reckons the $123.5 million spent on the buy will deliver significant cost synergies, especially when it comes to logistics, purchasing and billing. Sonic, which made its last big purchase in February with the €232 million acquisition of Belgium's Medhold Group, will fund the CBL acquisition from its existing debt facilities. The transaction is conditional upon CBL Path shareholder approval and anti-trust clearance. Healthcare private equity firm, Galen Partners, owns over 40 per cent of CBL, with the balance owned by management, staff and other private investors.
Wrapping up
Mining giant Rio Tinto is reportedly close to renegotiating its $1.65 billion a year Channar joint venture with China's Sinosteel. According to The Australian, a revamped agreement was confirmed by Sinosteel's chairman Huang Tianwen during a dinner hosted by Treasurer Wayne Swan for a group of Chinese state-owned enterprises with investments in Australia, in Beijing last Thursday night. Rio Tinto holds a 60 per cent stake in the Channar venture and Sinosteel holds the remaining 40 per cent and under the terms of the original agreement Sinosteel was to off-take 200 million tonnes of ore from the mine to supply the Chinese market, the paper said. In the agribusiness sector, the sale of CSR's sugar and renewable business, Sucrogen, to Singapore's Wilmar International has finally cleared the final regulatory hurdle with the Foreign Investment Review Board (FIRB) approving the transaction. The green light does come with some strings attached with CSR telling the market that it will have to ensure that it continues to meet all of its asbestos-related obligations, should it seek to repatriate all, or part of, the sale proceeds to its shareholders. The Sucrogen deal was in a many ways the tip of the iceberg with regards to foreign suitors hitting Australian shores for agribusiness targets and now UBS has highlighted Graincorp as the next juicy target, with analyst Lachlan Packer saying that with consolidation in the sector gathering pace Graincorp's conservative capital structure, infrastructure assets and diversified earnings base make it an attractive prospect. UBS has put a $10.30 target on Graincorp, which last traded at $8. Leighton Holdings will now pin its hopes on striking a written and binding governance agreement with Hochtief's Spanish suitor ACS after the Takeovers Panel rejected calls for ACS to launch a full cash bid for Leighton if it was successful in its bid for its German parent Hochtief. ACS has long maintained that it will be business as usual at Leighton and the two are set to meet in a couple of weeks. In the mining sector, Murchison Metals is in a trading halt ahead of an announcement on where it stands with regards to the $4.3 billion Oakajee port and rail infrastructure project. Murchison and its Japanese partner Mitsubishi have already pushed back the development schedule on the project. There is talk that the WA government could take the project off Murchison's hands if there is no tangible progress is shown. Bathurst Resources has reportedly lobbed a revised offer to the directors of Galilee Energy who have so far been immune to the West Australian coal explorer's overtures. Last month, Galilee's board rejected a $30 million offer from the explorer to acquire its slated New Zealand coal mining spin-off Eastern Resources Group. Galilee said at the time that Bathurst's offer at the time did not contain "key commercial terms” with regards to the nature of the transaction. Let's see if the picture is a little clearer this time around. Finally, Qantas' shares are continuing to slide as the national carrier's fleet of Airbus A380 aircraft remain grounded and with investigations underway to find the gremlins stuffing up the engines, Qantas CEO Alan Joyce said that measuring the full extent of the financial damage from the incidents will take some time and for the time being there was no talk of legal action against Airbus and Rolls Royce.
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