BREAKFAST DEALS: Westfield swap?

There's more speculation over the Lowys' Westfield holdings, while Southern Cross rallies on speculation of a deal with Nine.

What does the Lowy family’s decision to sell out of Westfield Retail Trust say about the future of Australian retail? That’s the question being asked in the Australian media this morning. Southern Cross Media could generate some pretty good synergies from a Nine Entertainment merger, though it’s not giving anything away. Also, there are yet more firm signs that Genworth Financial isn’t floating until at least the latter stages of the year, but that isn’t because broader IPO hopes are fading… because they’re not.

Westfield Group, Westfield Retail Trust

With January retail sales figures due today, speculation is increasing that the Lowy family might orchestrate a selldown of its shopping centre interests in Australia to expand abroad.

Last week, the Lowy family sold out of Westfield Retail Trust for $663.7 million with the assistance of UBS. While such a sale could be explained by the 22 per cent rally in Westfield Property Trust over the last 12 months, the move is being seen as a possible beginning of more things to come.

Fairfax newspapers point out that Westfield need only maintain a 25 per cent stake in each site to continue to generate management fees.

At the moment, of Westfield’s nearly 40 centres in Australia, 18 have a 50:50 ownership arrangement. It’s thought that the Lowys' decision to sell out of Westfield Retail Trust might turn out to be the starting gun for Westfield to start selling down its stakes, which house stores where sales aren’t growing, and putting the funds into expanding international markets.

This is a potential play that’s been speculated about for a long time. The stratospheric growth in Australian online retail sits in stark contrast to traditional retail sales.

Southern Cross Media, Nine Entertainment, Ten Network

Southern Cross Media shares finished yesterday’s session up 3.3 per cent in a terrible day of trading for the market after confirming that it’s "reviewing a number of strategic options”.

The classic non-committal corporate statement was in response to media speculation that the Ten Network-affiliated television and radio is in discussions with Nine Entertainment.

Shareholders perhaps responded well to the news that Southern Cross doesn’t appear to be irreversibly bound to Ten, which is in a bad patch at the moment to say the least.

The Australian reports this morning that a merger between Southern Cross and Nine could generate between $75 million and $100 million in synergy benefits.

WIN Television’s Bruce Gordon holds 14 per cent of Ten, which complicates matters no doubt.

But there’s little point in running through all the various scenarios because Business Spectator’s Stephen Bartholomeusz did it yesterday. Read the piece, it’s a cracker; especially the last paragraph.

Genworth Financial

It’s becoming increasingly likely that we can cross Genworth Financial off the list of IPO subjects this year as the mortgage insurer deals with an increase in payouts.

Fairfax Media has pointed out that in Genworth’s latest accounts in the US, lodged about a week ago, the company echoed comments from Genworth Australia chief financial officer Paul Fegan that 2014 is becoming more likely.

"The ultimate parent anticipates selling up to 40 per cent of its holdings in the Australian business, and the partial sale is not expected to occur prior to late 2013, subject to market valuation and regulatory considerations,” says the filing.

This follows comments from Fegan last month that the $800 million float remains a "key goal,” but won’t happen until the end of this year at the earliest.

That’s not to say that the renewed optimism around Australian IPOs has gone away. But Genworth’s timing has been in flux since it booked a bad set of first quarter numbers last year thanks to a rise in claims and delinquencies.

Although hopes that Healthscope might make a return to the ASX have been dashed by a debt issue.

GrainCorp, Archer Daniels Midland

If you look at the trading of Westfield Retail Trust, it hasn’t caught the market rally since November… Neither has GrainCorp.

The reason is of course the company’s trading is now largely married to the $12.20 a share offer from US grain giant Archer Daniels Midland, which was rejected. ADM is sitting on a 19.9 per cent stake in GrainCorp and hasn’t given any indication that it’s going anywhere.

The central case of GrainCorp’s rejection is that it’s strategically crucial infrastructure on the east coast is worth a good premium – word is that something above $13 a share will get the board talking. Plus, ADM’s offer is arguably lower than comparable deals going through in the sector.

The ADM case is that agriculture is a cyclical industry and the solid results that GrainCorp is booking won’t always be there to lean on.

What ADM is getting at is the drought conditions in Western Australia, which has forced hundreds of farms onto the market as growers just give up, will eventually find its way east.

If you want to find out the extent of Western Australia’s problem, check out this morning’s edition of The Australian. It’s depressing.

Wrapping up

Infigen told the market yesterday that it "continues to assess a range of options to provide improved financial flexibility” in response to a story in The Australian Financial Review – giving nothing away there.

This morning the newspaper understands that Lazard is advising the company on its options, which could include a scenario where it remains the operator, but sells some wind farms to pension funds of trading houses in Japan.

Sticking with energy, NuEnergy is issuing a $6 million capital raising that’s fully underwritten by RBS Morgans and Republic Investment Management, which are both existing shareholders.

You might remember Republic Investment Management handed over its substantial stake in Acer Energy to Drillsearch during its $132 million takeover bid.

Elsewhere, ASX-listed CO2 Australia has purchased Ecofund from the Queensland state government for an undisclosed amount.

And finally, in our own backyard Clime Asset Management has formed a 50:50 joint venture with Eureka Report, which is housed with Business Spectator in the News Limited owned Australian Independent Business Media.

Clime said in a statement that its board believes this will be a "significant milestone” for the company, which will combine its valuation service with Eureka’s reporting.


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