BREAKFAST DEALS: Westfield olive branch

Westfield makes peace with Hammerson over the Whitgift Centre, and Discovery Metals feels the heat from a Chinese suitor.

Westfield Group has buried the hatchet with one-time adversary Hammerson, over the Whitgift Centre in Croydon, London. Today could be a big one for Discovery Metals where it comes clean over its Boseto project amid needling from a Chinese suitor. Meanwhile, Billabong International shares have gained some more ground as two bidding groups examine the books, Telstra has picked up a complimentary business for Sensis and Rio Tinto’s Tom Albanese has fallen in part because of an inability to clean up a bad aluminium deal with a less aluminium bad deal.

Westfield Group, Hammerson

Westfield Group has come to a peace agreement with Anglo-French developer Hammerson, agreeing to redevelop an ageing shopping centre in south London together.

The Australian retail property giant announced yesterday that it has entered into a joint venture with Hammerson to rekindle the Whitgift Centre in Croydon. The joint venture will purchase a 25 per cent stake in the 42-year old site, where the £1 billion ($1.52 billion) construction project is expected to commence in 2015.

Westfield also said it will pick up a 50 per cent stake in the Centrale shopping centre from Hammerson for £115 million, a precursor to combining the two centres.

The pair was brought together rather unceremoniously when the building’s owners sided with both developers on the right to restore the site. The subsequent deadlock at times became quite tense.

"Croydon has huge potential to return to its former glory as one of London’s most vibrant town centres, and a major driver of its economy. The redevelopment of the Whitgift Centre at its heart is crucial to this vision,” said the ever-entertaining Mayor of London Boris Johnson.

Discovery Metals, CF Investments

It will be interesting to see if ASX-listed, African-focused miner Discovery Metals yields to the pressures of its unwanted Chinese bidder today.

Discovery has hit some troubles with its flagship Boseto copper project in Botswana lately and its suitor CF Investments – 75 per cent owned by Chinese private equity firm Cathay Fortune, 25 per cent owned by state-owned China-Africa Development Fund – said on January 9 in its fourth supplementary bidders statement that it wants answers by January 18.

The copper miner has rejected CF at $830 million, or $1.70 a share, backed up by independent expert KPMG. In turn, Cathay has criticised the assumptions of the $1.74-$2.11 valuation range by KPMG and jumped on the operational problems at Boseto.

CF went hostile in November after Discovery refused to engage with its Chinese suitor, which in truth is basically the private equity of one person, billionaire Yong Yu. He owns 99 per cent of Cathay.

Quite some time has passed since then, despite the Discovery share price trading at a noticeable discount to the offer price.

That’s probably because CF has underlined a minimum ownership condition, which raises the prospect of investors selling into a shareholder that simply gets a bigger stake in Discovery than it has presently, at 14.94 per cent.

Billabong International, VF Corporation, Altamont Capital Partners, Paul Naude, Sycamore Partners

Billabong International broke through $1 a share yesterday for the first time since one of its former suitors dropped its bid in October. The news prompted yet more headlines evoking hopes of a bidding war.

Despite yesterday’s 5 per cent surge, Billabong shares are still trading at an 8 per cent discount to the indicative, conditional proposals at $1.10 a share that have been put to the surfwear retailer by director Paul Naude in partnership with New York private equity firm Sycamore Partners and separately by US retail giant VF Corporation and Altamont Capital Partners.

That’s not the optimistic trading levels you expect when there’s a bidding war on the cards, or even significant hopes of a bidding war.

Basically what the trading reflects is the likelihood of another announced bidder in the mix holding its rival to $1.10 a share.

For what it’s worth, Sportsbet.com.au has VF Corp-Altamont as $1.67 favourite to win Billabong, over Naude-Sycamore at $2.10 a share.

Telstra Corporation, TrueLocal, News Limited

Telstra Corporation has picked up the online director TrueLocal from News Limited, the publisher of this website, for its Sensis business for an undisclosed amount.

The idea is that TrueLocal, which allows users to post reviews about local businesses, will drive traffic towards Telstra’s Yellow Pages network.

"TrueLocal also has an extensive library of ratings and reviews which enables consumers to make more informed decisions when they search for a local business,” Sensis managing director John Allan said.

The sale is subject to approval from the Australian Competition and Consumer Commission, which recently blocked Telstra from selling the licence for TradingPost and transferring operational control to Carsales.com.au.

Rio Tinto, Pacific Aluminium

The inability of Rio Tinto to rid itself of the worst parts of aluminium business Alcan, now housed in Pacific Aluminium, has finally cost chief executive Tom Albanese his job.

Albanese quarantined the assets in October 2011 in the hope that they could be hived off in a trade sale or IPO. At the time it was pointed out that Rio had recovered sufficiently from the Alcan scare, where it almost fell to Chinalco, and that the miner had the luxury of time. A quick sale wasn’t necessary.

Fifteen months later, Albanese has made way for Rio iron ore boss Sam Walsh following a $US10 billion-$US11 billion ($10.4 billion-$11.4 billion) writedown to the aluminium business.

It’s the deal that didn’t happen that finally brought Albanese undone. While the fault of the Alcan acquisition was attributed to former Rio chairman Paul Skinner, the mess is still there – although Albanese was appointed in 2007, which is a pretty solid stint at the top of a global miner.

Plus, selling aluminium assets is far easier said than done.

Queensland privatisations

Former Treasurer Peter Costello, who currently heads a commission pulling together advice for Queensland’s fiscal woes, is reportedly set to tell Premier Campbell Newman to sell the state’s electricity generation and transmission assets.

The Australian Financial Review reports that Costello along with fellow independent commissioners Dr Doug McTaggart and Prof Sandra Harding, will recommend that Queensland offload CS Energy, Stanwell Corporation and Powerlink.

The proposal will be just one of the recommendations the Costello Commission delivers next month for the state’s strategy to address its debt burden, set to reach $82 billion in 2015-16, according to the newspaper.

The AFR adds that the proposal could generate more than $10 billion for the state. Investment banks will be falling over themselves to win the advisory contracts if Newman decides to go down that road.

Wrapping up

Qantas Airways has reportedly cancelled one of its orders of a Boeing 787 Dreamliner that was set for long-haul operations for its low-cost arm Jetstar.

The Australian reports that the cancellation is not related to the problems Boeing has been experiencing with the long-delayed plane.

And with yesterday’s interim approval of Qantas’s 5-year alliance with Emirates, it will take a sizable, yet to be unearthed reason from a competitor to dissuade the consumer watchdog from approving the deal for good in March/April.

Meanwhile, The Australian Financial Review understands that Paul Ramsay’s 30 per cent stake in regional TV operator Prime Media Group has been shopped around by a US investment bank.

The newspaper says Ramsay is making preparations for changes in the audience reach rule and Kerry Stokes’ Seven Group Holdings is tipped as the most logical buyer.

And finally, UGL has picked up $170 million worth of work across a variety of deals, including a car fleet expansion, replacement substation equipment for TransGrid, wastewater services for Sydney Water and various maintenance contracts.

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