BREAKFAST DEALS: Westfield weigh-in

Westfield Group and AMP look set to end their partnership, while predators will be watching JB Hi-Fi's results.

Westfield Group is reportedly set to end a relationship that’s lasted half a century, but the divorce with AMP looks like being a good thing. JB Hi-Fi is handing down results today and retail predators will be watching closely. Elsewhere, Pipeline Partners Australia has today and tomorrow to match APA Group, Biota Holdings is urging shareholders to go with the Nabi Biopharmaceuticals takeover, even if the independent expert has reservation, and Qantas Airways will sell its best-named business when the time is right.

Westfield Group, AMP

We might be set for an announcement from Westfield Group and AMP if The Weekend Australian is any indicator.

According to the newspaper, Westfield and AMP are ending a 50-year partnership covering shopping centres worth a combined $6 billion.

Here’s the breakdown. AMP Capital will pick up the stakes it doesn’t own in Sydney’s Macquarie Centre (55 per cent), the Gold Coast’s Pacific Fair (44 per cent) and Perth’s Booragoon (25 per cent).

On the flip side, Westfield will assume full ownership of Sydney’s Warringah Mall, Melbourne’s Knox City and Brisbane Mount Gravatt.

Additionally, Westfield will purchase the management rights for Warringah for around $15 million.

The newspaper said both companies decline to comment on the story so there’s a possibility that we’ll be getting a press release, preferably soon given the implications of the report.

We might alternatively receive some news on Wednesday, when Westfield hands down its interim results. AMP is reporting the next day.

The Australian has followed up the weekend story with another one this morning, indicating that analysts believe Westfield will benefit from the deal.

Essentially, Westfield and AMP have different strategies and investment in the joint venture has become stale.

JB Hi-Fi

Electronics retailer JB Hi-Fi is due to hand down full-year results today and a positive surprise would really do the company some good.

Once the darling post-GFC Australian market, JB Hi-Fi joined the retail retreat, the stock is down 59 per cent since the beginning of 2010 – that’s more than Harvey Norman.

A report from Australian Securities and Investments Commission revealed on Friday that 21.2 per cent of JB Hi-Fi shares have been sold short. This is a big sign that the market believes JB Hi-Fi shares will fall further.

The further the share price falls, the more vulnerable JB Hi-Fi becomes to an opportunistic takeover; probably from private equity sector, which has a lot built up funds to deploy after years of low activity.

So far, JB Hi-Fi hasn’t been linked to even a fleeting report that a private equity firm is sizing it up, of which there have been no shortage. But the company is well run and the retail sector is firmly in the eye of private equity.

Best of luck, JB Hi-Fi executives.

Hastings Diversified Utilities Fund, Pipeline Partners Australia, APA Group

Pipeline Partners Australia has today and tomorrow to lodge a new bid for gas pipeline investor Hastings Diversified Utilities Fund. If it doesn’t, HDF will fall to APA Group.

Last week, the independent directors of HDF’s manager, Hastings Funds Management, decided that the $2.51 cash-and-scrip offer from APA is superior to the $2.35 cash bid from APA.

APA’s stock has sunk a bit since it was lodged on Thursday last week and it’s bid is now worth about $2.44.

There’s an opening for PPA – a joint venture between Hastings Funds Management (yeah, it feels a bit suss) and Canada’s Caisse de dpot et placement du Qubec – to throw in a bit more cash, which investors really like, but not match the headline value of APA’s bid.

In two days, we’ll know which choice they made.

Biota Holdings, Nabi Biopharmaceuticals

Independent expert Lonergan Edwards has put flu drug maker Biota Holdings in an awkward position.

It thinks the ‘takeover’ of Nasdaq-listed Nabi Biopharmaceuticals is "not fair” and dilutes the share register unnecessarily.

Just to recap, Biota announced the takeover in mid-April, but it’s effectively a backdoor listing. The move inspired a big debate about whether Australia’s capital markets are big enough to support the pharmaceuticals, which thrive in the US.

Lonergan Edwards might think the takeover isn’t fair, but Biota has run out of patience with the Australian market.

The independent directors have unanimously told shareholders to go through with the proposal because it’s "reasonable” and in their "best interest”.

Ruralco, Elders

Ruralco picked up an extra 2 per cent in embattled agribusiness company Elders and the story could have ended right there. But there could be more to come.

The Australian reports that Ruralco managing director John Maher sent a memo to staff painting the departure of northern operations boss Peter Watkins as an opportunity to "change the shape of out operations for the future”.

The change Ruralco has in mind is an expanded management team. Expanded management teams tend not to go down too well with investors unless the business expands as well.

Maher made it clear last week that Ruralco has no "current” intention to take Elders over, a qualification that Breakfast Deals finds difficult to resist.

The newspaper also reports comments from RBS Morgans analyst Belinda Moore.

"My personal view is that if John Maher could get access to Elders' rural services business, he would love it," says Moore. "That would certainly be a perfect fit."

Sundance Resources, China Sichuan Hanlong Mining

If the board of Sundance Resources is disappointed with the revised…enthusiasm that China Sichuan Hanlong Mining has for the iron ore company this news will be a boost.

The Australian Financial Review reports that hedge funds have no interest in Sundance holding discussions over proposals at 40 cents a share after Hanlong originally threw up a highly conditional proposal at 50 cents, $1.7 billion in total.

The newspaper also understands that Sundance has written to Hanlong urging them against a proposal at 40 cents a share. Apparently one shareholder covering "considerably more than 15 per cent” of the register could not accept 40 cents.

Sundance is still in a trading suspension as it tries to figure things out. The AFR says relations between Sundance and Hanlong is still cordial enough to get a deal done.

That’s good news for shareholders that are true believers. The last trading price was 33.5 cents a share.

Qantas Airways, Star Track Express

Qantas Airways could pick up $290 million for the sale of its half of the Star Track Express road freight business.

According to Fairfax, Qantas chief executive Alan Joyce said the airline plans to offload the stake as soon as there’s a convincing pick up in the market. The move was flagged in June.

Star Track (almost the best named company in human history) is a 50:50 joint venture with Australia Post. Qantas forked out $375 million for its half of the business back in 2003. Even philosophy majors can tell that means the value of the business has gone backwards.

In the long-term, that does not matter to Qantas. The airline desperately needs to repair its international business, which is haemorrhaging money.

Last month, Qantas made it clear that it’s in talks with a number of airlines about potential partnerships – hopefully tilted towards Asia.

And in the background to all of this is the potential for a private equity takeover, a feud with the federal government over the Qantas Sales Act, the aftermath of an industrial dispute and a battle with Virgin Australia over the lucrative business travel market.

Qantas is due to release its annual report in September. Anyone who thinks Joyce is overpaid should reflect on the list above before they sift through the report looking for his base salary.

Wrapping up

Rio Tinto is moving ever so slowly towards divesting its unwanted aluminium assets – few others appear to want them either.

According to The Australian Financial Review’s Jamie Freed, some Rio investors are starting to make the argument that the global miner should divest its entire aluminium division. Keep an eye on that.

In retail, a legal battle between Country Road and substantial shareholder Solomon Lew could erupt as early as today.

Lew, through his company Australian Retail Investments and its 11.8 per cent stake in Country Road, is threatening to prevent Country Road from raising $92 million.

Country Road, renowned for its reassuring knitwear, is looking to use the fund to buy Witchery.

And finally, the proposed sale of some Fitness First sites doesn’t appear to be going well.

Talks are dragging on and The Australian Financial Review has been told by sources that if a good price can’t be found, the business might fall short of its debt obligations.



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