BREAKFAST DEALS: Westfield's backspin
Westfield poised to step back in time with an REIT spinoff.
Shopping centre giant Westfield looks set to turn back the clock with a radical restructure of its business which will see it spin out a good, old fashioned REIT. An Ottawa green light for BHP's bid for PotashCorp will most likely come with hefty rules and conditions and is CVC Pacific Asia sprucing up PBL Media for a float with the promotion of James Packer's "best mate” David Gyngell as CEO? Elsewhere, Robert Elstone admits not talking to the government before jumping in bed with SGX and Leighton's shock profit slip sours Wal King's final days at the top of the construction giant.
Westfield Group
Westfield Group is reportedly set to reveal a radical shakeup of its $47 billion business which will see the shopping centre giant separate a portion of its local portfolio into a brand new trust. According to media reports, up to half of Westfield's local assets, valued at around $12 billion, will be spun into a new fund called Westfield Retail which is expected to launch a capital raising of up to $3.5 billion. According to The Australian, the new trust needs the blessings of Westfield Group shareholders who will vote on the issue in five weeks. However, part of the raising is expected to get underway immediately with a larger public offer to come after the shareholder vote. The rest of the assets will stay with Westfield Group along with the UK and US properties and the word is that the split is in some way designed to maximise the expansion possibilities of Westfield Group which will be a leaner, meaner entity set to deliver a higher return to capital. The decision by the Lowy family to create a good old fashioned real estate investment trust (REIT) turns back the clock on the reorganisation implemented in 2004 which saw Westfield Holdings, Westfield Trust and Westfield America Trust come together as one. While news of the complicated restructure leaked out on a day when the market's attention was focused on interest rates and the Melbourne Cup, it looks like the Lowys had been cooking up the move for some time now. According to The Australian Financial Review, the restructure has been months in the making with a legion of advisors working behind the scenes. The lead advisers to Westfield – Citigroup, Morgan Stanley and Credit Suisse – have been joined by the four Australian commercial banks and Deutsche Bank, JPMorgan, Merrill Lynch, Royal Bank of Scotland and UBS. Westfield is expected to outline the details of the deal today and unsurprisingly attention is already turning to what designs a cashed-up Westfield Retail may have on Centro Property Group's $4.5 billion portfolio up for sale. Given the fact that Centro's lenders are getting restless Westfield Retail could pick and choose the best of the portfolio at bargain basement prices.
BHP Billiton, Investment Canada, PotashCorp
BHP Billiton looks to have secured the goodwill of Investment Canada with regards to its $40 billion bid for Potash Corporation of Saskatchewan (PotashCorp) and while the department's recommendation is seen by some as a sign that the miner is set to cross the first of its three regulatory hurdles the mood in Ottawa remains politically charged and BHP's shareholders still see the decision finely balanced. Reports in the Canadian media about Investment Canada's positive stance failed to convince investors overnight with BHP shares rising in London on speculation that Canada's industry minister Tony Clement could still scuttle the deal. The BHP-PotashCorp dance which started in August has transformed into a mammoth political headache for the Canadian PM Stephen Harper who is struggling to balance his pro-business, free-trade stance against stark political realities. And it's these political realities that may well guide Ottawa's hand. An outright rejection seems unlikely despite the fact that Harper's minority government would like to avoid antagonising the Conservatives mainly because it risks damaging Canada's long-term business interests. A much likelier scenario could see the government allow BHP's bid but with some stringent conditions – moving executives to Saskatchewan, maintaining employment and output levels and force BHP to play ball with Canpotex. That will let Harper keep his pro-business reputation intact without too much political turbulence and of course Ottawa will be mindful to ensure that the promises made by BHP are not broken later down the line. Then again you never know Ottawa's conditions could well prove to be onerous enough to force BHP to walk away.
PBL Media
PBL Media has a new boss and its media mogul James Packer's schoolyard chum David Gyngell, who will replace outgoing chief executive Ian Law. The change at the top in media group will no doubt provide more ammunition to those in the market who have been talking up the prospect of PBL's private equity owner CVC Asia Pacific (CVC) preparing to float or sell the company. CVC has repeatedly played down the speculation for some time now but Gyngell's appointment could be a sign that CVC is weighing its options closely. Any impending float is most likely to be around the $5 billion mark and media pundits reckon installing Gyngell as the face of PBL Media will make the sales pitch all that easier. It also puts to rest any speculation of a move by Gyngell to join his "best mate” Packer at Ten Network Holdings. The AFR suggests that an initial public offering or a trade sale could be scheduled for the first half of 2011, with CVC expected to retain a 20 per cent stake. Speaking of Ten, it looks Nick Falloon's shift from an executive chairman to a non-executive director may have been designed to secure his future at the network. Falloon will reportedly not seek re-election to the board at Ten's next annual meeting, because under the Corporations Act he will be elected by fellow directors not shareholders.
ASX , SGX
ASX boss Robert Elstone has given the first indication that the local exchange operator may have overlooked and possibly underestimated the ferocity of the political backlash its mooted merger with the Singapore Exchange Limited (SGX) was going to ignite. Elstone admitted to the Dow Jones Newswires yesterday that the ASX did not consult with the federal government before agreeing to the takeover with the SGX and also said that he was prepared to negotiate changes in terms of the proposed $8.4 billion deal. Given the importance of the deal and the substantial value offered by the SGX it's not surprising to see that the ASX is willing to compromise to get the necessary regulatory consent, however, the deal which has been touted by SGX boss Magnus Bocker as a "one plus one definitely equals four” scenario does have its detractors. Credit ratings agency Moody's senior analyst Alexander Yavorosky said that cross-border exchange mergers seldom deliver on the revenue side and the deal poses "execution challenges.” Yavorsky adds that the cost and revenue synergies touted by Bocker and Elstone are not guaranteed in the short term and medium term and the merger will not prevent Chi-X and those that follow its footsteps into the Australian market from chipping away at ASX's market share. Elstone says he will apply for regulatory approval for the takeover by the end of this month.
Wrapping up
Leighton Holdings outgoing CEO Wal King will probably face a few knotty questions from shareholders at the next annual meeting tomorrow after the construction giant unveiled a surprise profit warning yesterday. Leighton's shares took a tumble after it revealed a net profit downgrade of 23 per cent. It looks the unexpected pain has come from an $85 million writedown due to delays and cost overruns on the Brisbane Airport Link project, a write-back from its railroad project in Western Australia and the strong Australian dollar. It's an unfortunate way for King to cap of his tenure at Leighton but investors will probably be keeping a closer eye on how his successor David Stewart deals with the situation. There has been talks that Stewart may take a more conservative approach and while Leighton said yesterday that it will try to limit the damage to its profits with the proposed sale of its Indian business it will be interesting to see if the downgrade will force Stewart to take a closer look at writing down the value of the Al Habtoor Leighton joint venture or selling its property business. Leighton did not specify the gain expected on the impending sale of the India stake which accounted for just 2.4 per cent of the group's operating revenues in 2009/10. Speaking of tough annual meetings directors of Murray Goulbourn Co-operative are in for a caning after confirmation that the Victorian police are investigating millions of dollars in ''potentially irregular payments'' made to a senior employee in relation to Middle Eastern dairy product contracts. Then there's the issue of the salary paid to the wife of chief executive Stephen O'Rourke for the past 12 years, which is sure to further antagonise suppliers and shareholders. In other news, Challenger Wine Trust went into a trading halt yesterday amid reports that the wine minnow may be mulling a possible capital raising and the possible sale of its vineyards in New Zealand. Challenger wine has been working with Bell Potter Securities to work on strategic financing alternatives. Navitas' latest acquisition in the US has failed to impress investors with shares of the education provider continuing to flounder thanks to the strong Aussie dollar and stricter student visa crisis. In overseas news, General Motors is reportedly looking to sell just over $US10 billion worth of common stock and $US3 billion of preferred stock in an initial public offering that would shift the US government to a minority shareholder in the top US automaker. More details are expected to emerge later tonight. Oracle is set to buy e-commerce software company Art Technology Group (ATG) for $US1 billion in cash in a move expected to help the company better compete with other large technology vendors like IBM. According to Reuters, Oracle's $US6-per-share bid represents a 46 per cent premium over ATG's close of $US4.10 on Nasdaq.
Westfield Group
Westfield Group is reportedly set to reveal a radical shakeup of its $47 billion business which will see the shopping centre giant separate a portion of its local portfolio into a brand new trust. According to media reports, up to half of Westfield's local assets, valued at around $12 billion, will be spun into a new fund called Westfield Retail which is expected to launch a capital raising of up to $3.5 billion. According to The Australian, the new trust needs the blessings of Westfield Group shareholders who will vote on the issue in five weeks. However, part of the raising is expected to get underway immediately with a larger public offer to come after the shareholder vote. The rest of the assets will stay with Westfield Group along with the UK and US properties and the word is that the split is in some way designed to maximise the expansion possibilities of Westfield Group which will be a leaner, meaner entity set to deliver a higher return to capital. The decision by the Lowy family to create a good old fashioned real estate investment trust (REIT) turns back the clock on the reorganisation implemented in 2004 which saw Westfield Holdings, Westfield Trust and Westfield America Trust come together as one. While news of the complicated restructure leaked out on a day when the market's attention was focused on interest rates and the Melbourne Cup, it looks like the Lowys had been cooking up the move for some time now. According to The Australian Financial Review, the restructure has been months in the making with a legion of advisors working behind the scenes. The lead advisers to Westfield – Citigroup, Morgan Stanley and Credit Suisse – have been joined by the four Australian commercial banks and Deutsche Bank, JPMorgan, Merrill Lynch, Royal Bank of Scotland and UBS. Westfield is expected to outline the details of the deal today and unsurprisingly attention is already turning to what designs a cashed-up Westfield Retail may have on Centro Property Group's $4.5 billion portfolio up for sale. Given the fact that Centro's lenders are getting restless Westfield Retail could pick and choose the best of the portfolio at bargain basement prices.
BHP Billiton, Investment Canada, PotashCorp
BHP Billiton looks to have secured the goodwill of Investment Canada with regards to its $40 billion bid for Potash Corporation of Saskatchewan (PotashCorp) and while the department's recommendation is seen by some as a sign that the miner is set to cross the first of its three regulatory hurdles the mood in Ottawa remains politically charged and BHP's shareholders still see the decision finely balanced. Reports in the Canadian media about Investment Canada's positive stance failed to convince investors overnight with BHP shares rising in London on speculation that Canada's industry minister Tony Clement could still scuttle the deal. The BHP-PotashCorp dance which started in August has transformed into a mammoth political headache for the Canadian PM Stephen Harper who is struggling to balance his pro-business, free-trade stance against stark political realities. And it's these political realities that may well guide Ottawa's hand. An outright rejection seems unlikely despite the fact that Harper's minority government would like to avoid antagonising the Conservatives mainly because it risks damaging Canada's long-term business interests. A much likelier scenario could see the government allow BHP's bid but with some stringent conditions – moving executives to Saskatchewan, maintaining employment and output levels and force BHP to play ball with Canpotex. That will let Harper keep his pro-business reputation intact without too much political turbulence and of course Ottawa will be mindful to ensure that the promises made by BHP are not broken later down the line. Then again you never know Ottawa's conditions could well prove to be onerous enough to force BHP to walk away.
PBL Media
PBL Media has a new boss and its media mogul James Packer's schoolyard chum David Gyngell, who will replace outgoing chief executive Ian Law. The change at the top in media group will no doubt provide more ammunition to those in the market who have been talking up the prospect of PBL's private equity owner CVC Asia Pacific (CVC) preparing to float or sell the company. CVC has repeatedly played down the speculation for some time now but Gyngell's appointment could be a sign that CVC is weighing its options closely. Any impending float is most likely to be around the $5 billion mark and media pundits reckon installing Gyngell as the face of PBL Media will make the sales pitch all that easier. It also puts to rest any speculation of a move by Gyngell to join his "best mate” Packer at Ten Network Holdings. The AFR suggests that an initial public offering or a trade sale could be scheduled for the first half of 2011, with CVC expected to retain a 20 per cent stake. Speaking of Ten, it looks Nick Falloon's shift from an executive chairman to a non-executive director may have been designed to secure his future at the network. Falloon will reportedly not seek re-election to the board at Ten's next annual meeting, because under the Corporations Act he will be elected by fellow directors not shareholders.
ASX , SGX
ASX boss Robert Elstone has given the first indication that the local exchange operator may have overlooked and possibly underestimated the ferocity of the political backlash its mooted merger with the Singapore Exchange Limited (SGX) was going to ignite. Elstone admitted to the Dow Jones Newswires yesterday that the ASX did not consult with the federal government before agreeing to the takeover with the SGX and also said that he was prepared to negotiate changes in terms of the proposed $8.4 billion deal. Given the importance of the deal and the substantial value offered by the SGX it's not surprising to see that the ASX is willing to compromise to get the necessary regulatory consent, however, the deal which has been touted by SGX boss Magnus Bocker as a "one plus one definitely equals four” scenario does have its detractors. Credit ratings agency Moody's senior analyst Alexander Yavorosky said that cross-border exchange mergers seldom deliver on the revenue side and the deal poses "execution challenges.” Yavorsky adds that the cost and revenue synergies touted by Bocker and Elstone are not guaranteed in the short term and medium term and the merger will not prevent Chi-X and those that follow its footsteps into the Australian market from chipping away at ASX's market share. Elstone says he will apply for regulatory approval for the takeover by the end of this month.
Wrapping up
Leighton Holdings outgoing CEO Wal King will probably face a few knotty questions from shareholders at the next annual meeting tomorrow after the construction giant unveiled a surprise profit warning yesterday. Leighton's shares took a tumble after it revealed a net profit downgrade of 23 per cent. It looks the unexpected pain has come from an $85 million writedown due to delays and cost overruns on the Brisbane Airport Link project, a write-back from its railroad project in Western Australia and the strong Australian dollar. It's an unfortunate way for King to cap of his tenure at Leighton but investors will probably be keeping a closer eye on how his successor David Stewart deals with the situation. There has been talks that Stewart may take a more conservative approach and while Leighton said yesterday that it will try to limit the damage to its profits with the proposed sale of its Indian business it will be interesting to see if the downgrade will force Stewart to take a closer look at writing down the value of the Al Habtoor Leighton joint venture or selling its property business. Leighton did not specify the gain expected on the impending sale of the India stake which accounted for just 2.4 per cent of the group's operating revenues in 2009/10. Speaking of tough annual meetings directors of Murray Goulbourn Co-operative are in for a caning after confirmation that the Victorian police are investigating millions of dollars in ''potentially irregular payments'' made to a senior employee in relation to Middle Eastern dairy product contracts. Then there's the issue of the salary paid to the wife of chief executive Stephen O'Rourke for the past 12 years, which is sure to further antagonise suppliers and shareholders. In other news, Challenger Wine Trust went into a trading halt yesterday amid reports that the wine minnow may be mulling a possible capital raising and the possible sale of its vineyards in New Zealand. Challenger wine has been working with Bell Potter Securities to work on strategic financing alternatives. Navitas' latest acquisition in the US has failed to impress investors with shares of the education provider continuing to flounder thanks to the strong Aussie dollar and stricter student visa crisis. In overseas news, General Motors is reportedly looking to sell just over $US10 billion worth of common stock and $US3 billion of preferred stock in an initial public offering that would shift the US government to a minority shareholder in the top US automaker. More details are expected to emerge later tonight. Oracle is set to buy e-commerce software company Art Technology Group (ATG) for $US1 billion in cash in a move expected to help the company better compete with other large technology vendors like IBM. According to Reuters, Oracle's $US6-per-share bid represents a 46 per cent premium over ATG's close of $US4.10 on Nasdaq.
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