BREAKFAST DEALS: Woolies stirrer
Woolworths
Woolworths' latest quarterly sales figures have shown that the retail heavyweight is keeping pace with rival Coles but outgoing boss Michael Luscombe has made it quite clear that it is not backing down in the ongoing price wars between it and Coles. So far the battle lines have been drawn along milk and beer, however, The Age has pointed out another theatre of operation where the grocery giants are apparently trading blows. According to the paper, Woolworths and Coles have been cutting prices on pre-mixed spirits in the lead up to the Easter-Anzac Day long weekend. Woolworths reportedly got the ball rolling last week with its liquor outlet Dan Murphy promoting slabs of Bundaberg Rum and coke Jim Beam at below recommended retail and independent retailer wholesale prices. Coles responded swiftly with even cheaper prices. While Foster's didn't take too kindly to the deep discounting of its beer and decided to pull its key stock to protect its brand, The Age reports that so far the supplier of the pre-mixed drinks – Diageo and Coca-Cola Amatil – have made no such move. So is it just standard retail competition between two keen rivals or are the two retail heavies taking their fight too far? You take your pick. Meanwhile, in other retail news, South Africa's Pick n Pay, the owner of the Franklins chain, has reiterated that it will sell the business through a tender process if suitor Metcash fails in its court case with the Australian Competition and Consumer Commission. A decision on the case is expected at the end of June.
BHP Billiton
BHP Billiton has provided the first glimpse into how it plans to expand its West Australian iron ore business with the mining giant unveiling the plans to the proposed development of an outer harbour facility at Port Hedland. BHP currently ships out close to 150 million tonnes of iron ore out of Port Hedland annually but the plan is to get that number to rise as quickly as possible. BHP's expansion seeks to beef up the shipping capacity by 240 million tonnes per annum through the development of two kilometres of wharves with eight new shipping berths and four ship loaders. The extra capacity at the port means that BHP will also have to expand its mines and railway connection and the miner plans to build 32 kilometres of new connecting rail lines and eight kilometres of conveyors connecting the Boodarie stockyard with new port facilities. The entire project is split into four stages, each set to take about two to three years, and board approval for the mammoth project is expected by the second half of the year. BHP's move has been necessitated after it failed to lock in its joint venture with Rio Tinto last year, which would have given it access to Rio's Cape Lambert and Dampier ports. If BHP's plans get the necessary environment approval then exports from Port Hedland could ramp up significantly by 2020. However, as The Australian Financial Review points out, a bigger, better Port Hedland could mean that BHP may have to share the additional capacity with Fortescue Metals, Hancock Prospecting and other iron ore juniors. The other option for BHP, just in case the proposed expansion turns sour, is to develop a new port at Anketell Point near Cape Lambert with Fortescue and Aquila Resources. However, the AFR reports that that scenario would see BHP provide third-party access to any rail line it builds to the new port.
Leighton Holdings
Leighton Holdings has run into another couple of headaches as the construction giant steadies its balance sheet, with a bureaucratic hold up in India and worrying signs from its Middle Eastern joint venture. First to the red tape in India which has reportedly delayed the payment of the $104 million Leighton is set to pocket after selling its 35 per cent stake in Leighton Contractors India. Leighton sold the stake last December but The Australian reports that it is yet to receive the payment. Leighton has told the paper that the bureaucratic processes of the Reserve Bank of India has already caused it to alter the deadline for receipt of funds twice and it is now expecting the money by April 30. The other headache is the growing speculation that Leighton may now have to pour more money into its ailing Middle East joint venture, despite pumping $272 million into the business. Al Habtoor Leighton's chief executive Laurie Voyer has told Reuters that the company may need a cash injection from Leighton if its ongoing legacy projects are not paid in time. The company is working on projects in the range of $5.16 billion and Leighton has written down the book value of its stake in Al Habtoor Leighton to $525 million.
Centro Properties, Centro Retail
We know that Centro Properties Group's senior lenders have worked out a contingency plan just in case their recapitalisation plans for the shopping centre goes south, however, there is talk that Centro Retail Group may be working on another plan. The proposed restructure will see $3.65 billion of Centro Properties' debt converted to equity, leaving shareholders and hybrid security holders with $100 million to share. The move will also see Centro Properties rolled into its Centro Retail, however, The Australian reports that some within Centro Retail are mulling an alternative restructure via a heavily discounted capital raising to allow Centro Retail to remain as an independent entity. The idea apparently was broached some time ago but was discarded by lenders, who are unlikely to revisit it again.
RHG, John Kinghorn
If RHG Limited's chairman John Kinghorn thought that his move to back down from the delisting of the business was going to placate a campaign led by rebel shareholders, then he was sorely mistaken. The rebels led by managers Geoff Wilson and Karl Siegling have paid little heed to Kinghorn's conciliatory tones and are pushing through with their plans to take control of the boardroom. Kinghorn's offer was rejected by corporate governance adviser ISS Governance who told shareholders to vote against a controversial buyback, and it looks like shareholders are still smarting from what they see as a cynical move by Kinghorn to grab the remaining profitable piece of the business through a low ball buyback plan that left them with little choice.
Wrapping up
There is talk that Goldman Sachs boss Lloyd Blankfein may be looking to step down from the Wall Street heavyweight as the years take their toll. According to The New York Times, an imminent departure is unlikely given that banks are still trying to hash out new banking regulations with the White House, but Blankfein may hand over the reins once that task is completed. The paper also cast an eye over his possible successors, with vice chairman Michael Sherwood, Michael Evans (the man behind Goldman's Asian business) and Blankfein's top deputy Gary Cohn all in the list. Meanwhile, it looks like the €9 billion foreign currency swap conducted by Barclays in March that led to all the chatter about BHP and Woodside has also spawned a couple of other juicy potential tie-ups. One of these is a merger of Macquarie Group and Barclays and The Australian Financial Review reports that it's one of those rumours that just refuses to die down. The paper adds that Macquarie may be a bit too expensive for Barclays and any move by Macquarie for Barclays will require jumping through regulatory hoops. Elsewhere, it looks like the major local institutional funds are losing faith with private equity, with reports that Victoria Funds Management Corporation and MLC Private Equity have both undergone significant management changes as they look to move their money into more liquid asset classes. According to the AFR, VFMC has made joint head of privet markets David Brown and private markets director Andrew Strachan redundant, while MLC has lost its global head David Krasnostein. In the resources sector, China's Minmetals Resources has got the ball rolling on its well publicised equity raising to repay the $US694 million loan related to the acquisition of Mining and Metals Group last year. MMR is looking to raise up to $HK6.72 billion ($A825.7 million) with a stock sale according to a term sheet of the offering seen by Reuters. The company plans to sell up to 1.2 billion new shares each at a price range of $HK5.20 and $HK5.60, a discount as large as 11.7 per cent from its last traded price. Minmetals has hired BOC International, Citigroup, Credit Suisse, Deutsche Bank AG, Macquarie and Morgan Stanley as bookrunners. Elsewhere, coal seam gas player Dart Energy, run by the former management of Arrow Energy, has raised $100 million to fast track work on its resource base, while Molopo Energy, which recently saw the installation of a brand new management team, is reportedly looking to sell its Queensland coal seam gas assets.
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