BREAKFAST DEALS: Woodside wrangling

Woodside's boss searches for a way to meet major shareholder Shell's exit price, while Gina Rinehart ups the ante in her Fairfax board push.

Woodside Petroleum boss Peter Coleman is trying to find a way to allow Shell to exit its register so the share price can rise. Part of the journey towards that goal could be, strangely, to buy other people’s shares. Meanwhile, Macquarie Group has been named in two deals linking it to infrastructure in the Philippines and sugar in the motherland. Elsewhere, Gina Rinehart is turning up the heat on Fairfax Media chairman Roger Corbett with some critical words and a few extra shares, Talent2 International shareholders mightn’t be so impressed with the healthy premium on the table to take it private, and it appears Hastie Group’s accounts scared a few takeover aspirants away towards the end.

Woodside Petroleum

In the case of Royal Dutch Shell’s exit from Woodside Petroleum, it’s a battle of two Peters. Woodside boss Peter Coleman told analysts at a briefing in Perth that the oil and gas company would not be considering a buyback of Shell’s 42 per cent stake, currently worth $6.1 billion.

However, Coleman also engaged in a broader discussion about what the company would do with the extra cash it’s coming in to if the right acquisition doesn’t come along. The Woodside chief said the company would look at returning cash to shareholders through a variety of means, one of which could be a broadly targeted buyback.

Here’s where the other Peter comes in. Coleman said Woodside wouldn’t target Shell specifically in the buyback, unless Shell wanted to sell at the "right price”. It’s been widely reported that Shell boss Peter Voser doesn’t want to exit Woodside for anything less than $35. The stock closed yesterday at $31.64.

How do you bridge the gap? Coleman has previously stated that Woodside had received interest from a range of investors interested in buying out chunks of Shell’s stake. Woodside needs to find a way to boost the share price to the point where Shell is willing to sell.

If Coleman can’t find an acquisition that suits his vision, he could tip the company’s purse on the register and buy back shares while the stock is weighed down by Shell’s intentions. This isn’t just the most opportune time to conduct a buyback, but also serves the longer-term goal of aiding Shell’s exit because buybacks support share prices.

If Woodside can design a buyback program that can help push the share price above $35 – a decent enough benefit for shareholders – it might be able to coax Shell into selling that’ll boost the stock further.

It’s preference, however, is still for an acquisition. And the final question for the scenario outlined above is what price those investors jostling to buy Shell out are willing to pay.

Macquarie Group

Investment bank Macquarie Group has been attached to two new investments indicating a desire for infrastructure and all things sweet.

First of all, Macquarie Infrastructure and Real Assets (MIRA) intends to invest $50 million in the Philippine Investment Alliance for Infrastructure, which to be launched in July. More big investors are expected to follow in the silver donut’s footsteps. The country’s largest state-owned pension fund, the Government Service Insurance System (GSIS), also announced MIRA as the manager of the fund after a nine-month search. GSIS will take a lead investment in the fund.

Meanwhile, Macquarie will also take the place of Singapore’s Wilmar International as a 42.5 per cent shareholder in commodity trading house C Czarnikow Ltd, which has a focus on sugar, for an undisclosed amount. Fellow shareholder British Sugar will remain owner and Macquarie will work alongside Czarnikow management to grow the company further.

Fairfax Media, Hancock Prospecting, Gina Rinehart

Mining billionaire Gina Rinehart has increased her stake in and hostilities with Fairfax Media, singling out chairman Roger Corbett for criticism. Through her company Hancock Prospecting, Rinehart has bumped up her stake to 13 per cent while she pushes for two board seats.

Rinehart had some very pointed comments for Corbett. "There are questions to be raised concerning the current chairmanship that has presided over both an approximately 60 per cent loss in share market value and continuous loss of circulation of all [its] major mastheads, which in turn [affects] revenue,” Rinehart said in a statement. Interestingly, her criticisms are confined just to chairman Roger Corbett and do not extend to chief executive Greg Hywood.

At the moment, this appears to be just argy-bargy over those two board seats Rinehart wants. According to rival News Limited publication The Australian, it’s understood that the Fairfax board is still in fact wrestling with the billionaire’s request and that last week’s director appointment of Ernst & Young chief executive James Millar was not a snub of Rinehart. Apparently Fairfax has been looking at Millar for months.

The supposed problem for Fairfax is that John B Fairfax was given two board seats in recognition of his family’s 14 per cent stake in the company before they sold out. However, the Fairfax family name obviously carries a much greater significance with the company and the editorial independence that’s synonymous with its branding – something Rinehart is supposed to be less enthusiastic for.

Rinehart might have an emerging ally in Allan Gray Australia fund manager Simon Marais, who has made certain supportive signals for the mining baroness. Given that Marais proved to be quite effective in exerting pressure on Spotless Group, particularly on chairman Peter Smedley, when it was being pursued by Pacific Equity Partners, Fairfax and Corbett should beware.

Talent2 International

Founders of recruitment firm Talent2 International have joined forces with fellow major shareholder Allegis from the US to take the company private, using an initially tantalising 64 per cent premium as bait.

Shareholders will receive 78 cents a share from Morgan & Banks Investments (MBI), owned by Talent2 founders Geoff Morgan and Andrew Banks, and Allegis. The company will be owned 50-50 between the two. The board has backed the scheme of arrangement, appointed an independent committee advised by KPMG Finance and tapped Lonergan Edwards for the independent expert’s report.

Given that the shares were trading at 47.5 cents before the deal was announced, it looks like a good deal all round. The company doesn’t have to deal with the chores of being public and shareholders get a big fat premium.

However, Talent2 International shares were sitting above $1 before a profit warning in December brought them tumbling down. It’s also being speculated that Allegis will eventually buy Morgan and Banks out and it would take quite a turnaround in fortunes for Talent2 to rebound to an extent where the pair would be able to realise the value it was worth just six months ago.

Indeed as SmartCompany’s James Thomson explains, it’s a much farther cry from the levels achieved before the global financial crisis hit.

Hastie Group, Kohlberg Kravis Roberts

The collapsed engineering firm Hastie Group failed in its last-minute attempts to find a buyer willing to take on its $500 million debt burden. According to media reports, Kohlberg Kravis Roberts had a look at the company and The Australian Financial Review says that Navis Capital Partners was also sized up as a potential buyer.

Receivers PPB Advisory will now sift through the wreckage to see what can be salvaged and it’ll be interesting to see which players emerge to pick up what’s left of the business.

Wrapping up

In mining, OZ Minerals has struck a deal with Canada’s PBX Ventures, which could earn it 90 per cent of the proceeds from the company’s Copaquire copper-molybdenum project in northern Chile. Meanwhile, Chinese-owned Minmetals Resources is looking for a buyer of its Avebury nickel mine in Tasmania and junior coal plants NuCoal Resources and Gujarat NRE have picked up investments from Japan’s Mitsui Matsushima and India’s Jindal Steel and Power, respectively.

Takeover target Alesco Corporation has again told its shareholders to take no action in relation to the Dulux Group offer of $2 a share. Although with the share price now dipping below the offer price after initially trading at a premium, Alesco might have to offer a slightly more compelling case. Elsewhere, The Australian Financial Review says there’s an interested party that’s keen on striking a deal with struggling timber company Elders, however it’s unclear whether that would be for the whole company or just a slice.

In NBN news, a draft decision by the Australian Competition and Consumer Commission has unsurprisingly indicated the $800 million deal with Optus for its coaxial network will go ahead. And over at rival ISP iiNet, Internode founder Simon Hackett will step back from management and sit on the company’s board, now that it’s in the iiNet tent.

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