BREAKFAST DEALS: Worldwide Woodside

Woodside's new boss backs up his 'global' goals with a speculative buy in Cyprus, while Coalworks advises shareholders to hold firm after Whitehaven's offer.

Woodside Petroleum is teaming up with Israel’s Delek for a possible LNG expedition in Cyprus. Given Woodside’s more cautious and international approach under new boss Peter Coleman, this could be the beginning of something that really shapes the company. Meanwhile, National Australia Bank is launching its first subordinated note in 13 years, and the price for retail investors is pretty compelling. Elsewhere, another possible diamond combination involving BHP Billiton’s division has emerged, this time from Russia, Coalworks has told its shareholders not to accept Whitehaven’s advances at the current price and Dulux Group has played it cool on the prospect of a better Alesco Corporation offer.
Woodside Petroleum

Woodside Petroleum chief executive Peter Coleman has given a brief glimpse into what the oil and gas company might have in mind for its spare cash. Speaking at an industry event in Adelaide yesterday, Coleman confirmed reports from the weekend that his company is bidding for deepwater gas ground off the coast of Cyprus, in conjunction with Israel’s Delek. The Cypriot government has identified the territory as a future LNG development and put nine permits on the table for 15 bidding companies.

In the 12 months that Coleman has been in the top job, Woodside has been reshaped as a company that’s more internationally minded and more measured in its expansion. Earlier this month, Woodside announced that it would sell $2 billion in equity to Japan Australia LNG – a vehicle of Mitsui and Mitsubishi – in the Browse LNG project. This was more than the market was anticipating and raised questions about what Coleman might do with the money. He flagged something "global”.

Bidding for the ground an LNG project could be based at is hardly an earth-shattering acquisition. But if the ground is fertile and it suits Woodside’s strategy – as it appears to – this could become a much bigger deal in the rear-view mirror.

National Australia Bank’s subordinated notes

National Australia Bank has sought to further diversify its funding portfolio amid tightening credit conditions and a tough domestic loan book. NAB will issue $500 million of subordinated notes, the first time it’s done so since 1999. It’s an impressive price that NAB has thrown up for retail investors, with a yield margin of between 2.75 per cent and 2.85 per cent over the 90-day bank bill swap rate. Compared to the current term deposit offerings, which NAB slashed by 50 basis points, there’s some value there.

NAB’s move comes not just amid higher international borrowing rates, but the increasing capital requirements under Basel III. NAB says the notes will be eligible under Tier-2 capital.

BHP Billiton, Rio Tinto

It’s not often that two mining giants exit the same commodity at the same time. Hence, the different scenarios being thrown around for the looming departure of BHP Billiton and Rio Tinto from the diamond mining business are … varied.

According to Moscow newspaper Vedomosti, Russia billionaire Suleiman Kerimov lobbied the Russian government to include a 51 per cent stake in diamond miner OAO Alrosa in its asset sale program. According to the report, the plan was to purchase that stake and combine it with BHP’s diamond division and then float the lot. Alrosa flagged a selldown in the government’s 90 per cent stake in the business on March 16.

The other favourite report doing the rounds recently has been the apparent desire of private equity giant Kohlberg Kravis Roberts to opt for a similar move, except with Rio’s diamond division, rather than Alrosa.

Coalworks, Whitehaven Coal

Coalworks has recommended that shareholders reject the $142 million, $1.00 per share offer from Whitehaven Coal, arguing that it undervalues the company. The target claims that the offer doesn’t recognise the value of its assets, nor the potential for it to grow into an independent coal producer. Coalworks also adds that the offer doesn’t recognise the synergy benefits available to Whitehaven and has been timed to coincide with moves to oust chairman Wayne Mitchell and chief executive Andrew Firek. Indeed it does sound opportunistic.

Counting against Coalworks is the fact that Whitehaven owns over 17 per cent of the register, so it’s not to be ignored. Additionally, Coalworks shares are trading at twice the levels seen before the Whitehaven Coal-Aston Resources merger was revealed, which increased trading in Coalworks as a likely downstream takeover candidate.

Dulux Group, Alesco Corporation

Dulux Group chief executive Patrick Houlihan has treaded a fine line between talking up the company’s bid for Alesco Corporation but not sayings it’s a must-win proposition. With the target’s share price trading at a premium, it would have been tempting for some investors to think the bid a necessity, given Dulux has just posted a 2 per cent contraction in half-yearly profits to March 31 amid a challenging property market.

Houlihan isn’t flinching to the markets expectations for a higher bid, simply saying that the paints company would exercise discipline in its quest to win over Alesco. Having almost 20 per cent of the register certainly helps, but the market was unswayed by Houlihan’s poker-face, with the Alesco share price finishing flat.

Echo Entertainment, Crown, James Packer

Crown Limited billionaire James Packer has really stepped up his campaign against the board and management of Echo Entertainment. According to The Australian, Packer has joined the wave of analyst criticism of Echo for the controversy surrounding the sacking of GM Sid Vaikunta and the disappointing attendance numbers at The Star.

"Investors would now be wondering about management’s decision to spend $1 billion on upgrading The Star and then going on to trash their own brand through incompetence,” Packer said, according to the newspaper. The billionaire added to his increasingly bitter personal feud with Echo chairman John Story, saying "there is always an explanation why the companies he leads are doing badly”.

Metals X, Westgold Resources

Metals X and Westgold Resources have decided to join forces with an all-script deal to create a $330 million junior miner. Under the proposal, Westgold shareholders will receive 11 shares in Metals X for every 10 shares they own. This gives them a value of 22 cents a share, a 33 per cent premium on the last traded price.

Westgold chairman Michael Atkinds pointed to the progress that could be made towards the development of the Central Murchison Gold project and the Rover 1 Project. Metals X managing director Warren Hallam said the proposal is representative of the company’s focus on production. Some market participants didn’t take Hallem’s reassuring words too seriously, with the Metals X share price falling 10.8 per cent.

Wrapping up

Independent expert PricewaterhouseCoopers says DirectCash Payments is being opportunistic with its $171 million bid for ATM-owner Customers Limited, but it offers the tightly held register a chance to sell out. Over half the target is held by just five shareholders.

In media, News Corp has picked up a 19.9 per cent stake in Chinese film distributor Bona Film Group for an undisclosed amount. Under the terms of the agreement, News will purchase a stake in the company directly from founder, chairman and chief executive Dong Yu.

In resources, Yancoal Australia has received the blessing of the Hong Kong Stock Exchange to take over Gloucester Coal. The target’s shareholders are set to vote on the proposal on June 4. And AGL Energy has sold its Hallett 5 wind farm to Eurus Energy for an undisclosed amount of money.

And finally, Lend Lease Group and Leighton Holdings subsidiary John Holland have picked up contracts for Victoria’s regional rail link. Lend Lease’s Abigroup has won a $570 million contract for the Maribyrnong River section of the rail line, while John Holland has picked up a $750 million deal for the same project.