BREAKFAST DEALS: Wesfarmers wanderlust

Wesfarmers muses the potential of overseas acquisitions, while Gunns growers give the nod to Macquarie Group's restructure proposal.

Wesfarmers chief Richard Goyder isn’t just talking about acquisitions, but overseas acquisitions. Macquarie Group now has to sell its Gunns Limited management investment schemes restructure to the courts after winning over the company’s growers. Meanwhile, Southern Cross Media is trying to take the heat out of some of the media deals speculation and the New Zealand government is getting on with its asset sales.

Wesfarmers, Coates Hire

Today Wesfarmers boss Richard Goyder will address shareholders for the company’s annual investor strategy day. Some of those shareholders will have a few deals questions in their heads.

Goyder was at the G100 Congress in Sydney yesterday where he spoke about the Western Australian conglomerate’s potential to make acquisitions overseas.

“Inevitably I think in the years ahead Wesfarmers will do more offshore,” said Goyder.

“We will have a look and we will probably dip our toe in various places.”

While undoubtedly vague, Goyder’s comments underline the company’s willingness to contemplate deals openly. Such behaviour wouldn’t have been acceptable from a shareholder point of view not too long ago thanks to the price Wesfarmers had to pay to get Coles Group into the tent.

As Goyder noted, overseas acquisitions are riskier and the company would do everything in its power to keep shareholders happy.

“Australian companies have a mixed track record when going overseas and it is easy to burn a lot of shareholders' money in doing it...So you've just got to understand there is more risk in doing it," Mr Goyder said. Just think about the experiences of National Australia Bank and Insurance Australia Group in the UK.

This feels like it’s part of Wesfarmers’ longer-term thinking. On the more immediate agenda is the prospect of purchasing heavy equipment hire company Coates Hire, co-owned by billionaire Kerry Stokes and private equity giant Carlyle Group.

Reports suggest Wesfarmers isn’t interested in paying a high price, which could be the outcome for Coates given that a number of other big players have shown interest. Additionally, it’s thought Stokes and Carlyle haven’t ruled out a float instead of a sale.

You can also keep a line through the idea of Wesfarmers selling the underperforming department store Target, as Goyder installed key lieutenant Stuart Machin to run the business earlier this year.

But the deals talk is nonetheless swirling around Wesfarmers again, with $2 billion of breathing room in its debt facilities.

Gunns Limited, Macquarie Group

As expected, investment bank Macquarie Group chalked up a win yesterday with Gunns Limited growers voting strongly in favour of its restructure proposal. But it’s not over yet.

Macquarie wants to take over a $500 million portfolio of Gunns’ management investment schemes from liquidators PPB Advisory and receivers KordaMentha. The growers like the proposal.

But the Victorian Supreme Court will have to sign off on the deal and that doesn’t look like a lay down misere.

KordaMentha tried to have the meetings stopped by the courts. While judge Tony Pagone wasn’t swayed enough to prevent the meetings from taking place, he did hear a “strong argument” that the restructure could be false or misleading, according to The Australian.

Southern Cross Media, Nine Entertainment

Southern Cross Media chief Rhys Holleran has thrown cold water on speculation that it might sell some assets to cut its debt load.

Speaking to The Australian Financial Review, Holleran emphatically denied the rumours about divestments to Nine Entertainment after stalled media legislation in Canberra delayed merger discussions.

“There has been absolutely no discussion about any divestments,” a normally reticent Mr Holleran told the newspaper.

The Australian has reported that WIN Corporation is in talks with Nine over possible asset sales.

Meridian Energy, Genesis Energy

Strike while the iron is hot. That appears to be the motto of the New Zealand government.

Fresh from the successful float of a 49 per cent stake in Mighty River Power, the Key government has got the ball rolling on stake sales for Meridian Energy and Genesis Energy.

Macquarie Group, Goldman Sachs and Deutsche Bank have been recruited as joint lead managers for the Meridian IPO, while UBS has been tapped to help out with the Genesis sale.

Mighty River Power shares rallied more than 3 per cent yesterday to back within striking distance of the $2.50 float price.

While the current standing of the share price absolutely validates the Mighty River Power float, it will become a barometer of sorts for the New Zealand government as it moves towards further asset sales.

The higher the price, the more shareholders will want a crack at something new.

Wrapping up

Mining giant BHP Billiton has underlined the new rule in the resources industry: if you don’t get your costs down you don’t get the deal with us.

Leighton Holdings’ subsidiary Thiess has been removed as contractor from BHP’s South Walker Creek mine in exchange for HSE Contractors, which has also taken business from Leighton at BHP’s Peak Downs mine.

Also in resources, Sundance Energy is moving to raise as much as $63 million according to The Australian Financial Review, which has obtained a term sheet.

Meanwhile, QBE Insurance is conducting a tender offer for up to $US500 million of senior convertible securities that will be due in 2030.

Virgin Australia is continuing to tick the boxes for its purchase of a 60 per cent stake in Tiger Airways with the Foreign Investment Review Board signing off on the deal without objections.

And finally, OZ Minerals copped some hostile questions from shareholders yesterday, thanks largely to the company’s almost record-low share price.

OZ boss Terry Burgess is sitting on a warchest and is refusing to be hastened into deploying it prematurely.

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