INDIAN summers are often considered a good thing, unless you're the Australian Test cricket team. Or if you're at the receiving end of a trademark corporate raid from Sir Ron Brierley.
At age 74, Sir Ron is set to gain control of India Equities and chair the fund after reaching a $8.3 million purchase agreement last month. And already, the fund - established to invest in shares listed in India before it stopped doing so in July last year - has launched an assault with the hallmark brashness and opportunism often seen in Brierley's heyday.
Late on Friday, India Equities (INE) launched an unconditional 4.8? a unit on-market offer, worth about $3.9 million, for all the units it did not already own in the Asset Backed Yield Trust (AYT) of Adelaide Managed Funds, a subsidiary of Bendigo and Adelaide Bank.
Units in the trust had last traded at 4.4?, and INE's offer ticks all the boxes when it comes to healthy premiums over historical average prices.
The twist, however, is that AYT will be delisted on Thursday, as has been the plan since September last year. AYT has liquidated its holdings and returned capital to its unitholders, to the point that the only assets it now holds are loans made to individuals who invested in the ill-fated Great Southern managed investment schemes.
Those hapless investors were finally granted the right to launch a class action against the Bendigo and Adelaide Bank last month, but more on that later.
Needless to say, the carrying value of the loans (that is, what AYT expects to be repaid) has been marked down significantly about three-quarters to about $3.8 million.
Clearly those in Brierley's camp see some value in the loans that the accountants cannot.
With only two days to go, AYT has refused a request to postpone its delisting, arguing that the offer fell short of the units' net tangible asset backing of 5.5? a unit. It said the fact that unitholders only had four trading days to consider the offer was "inconsistent with the principles of the Corporations Act".
INE validly argues that the offer provides unitholders with the certainty of cash in hand rather than the uncertainty of future distributions, and that AYT has historically always traded well below its NTA values.
If AYT doesn't budge, INE looks unlikely to be able to gain control by Thursday, but it will be able to keep the shares it has vacuumed up in the meantime.
Qube's chain reaction
FREIGHT and logistics company Qube, chaired by former Patrick chief Chris Corrigan, has made little secret of its desire to expand its transport services to all points of the supply chain from "pit to port".
Having broken into in the S&P/ASX 200 for the first time in September, Qube yesterday announced the completion of an $85 million capital raising through a share placement, $50 million of which will be taken up by cornerstone shareholder Carlyle Infrastructure Partners. Carlyle's stake in Qube will increase from about 10 per cent to just shy of 15 per cent.
In its announcement to the market, Qube said it was "negotiating several acquisitions and investments".
One clear option will be to increase its ownership in the Moorebank development site, in New South Wales, on which a large intermodal freight terminal, in close proximity to the M5 and linked by rail to Port Botany, will be built. Qube chief executive Maurice James himself a former Patrick senior executive has previously admitted interest in property group Stockland's 55 per cent share, which has been valued by some at about $200 million.
It is all part of a plan to benefit from state governments investing in rail transport services to ports.
NSW in particular, has had a big problem with freight congestion at its ports and roads, while use of rail for freight has declined steadily in the past five years, in part due to inadequate infrastructure. The $1 billion Moorebank terminal is designed to alleviate the problem. Qube Logistics has also invested in developing infrastructure for handling bulk materials in Western Australia.
But Qube is just likely to absorb smaller operators to bolster existing gaps in its supply chain offering, for example in trucking to retailers.
"Anything they can add to their existing businesses and create synergies will be of interest," Simon Dumaresq, an analyst at EL & C Baillieu said. "There are a lot of smaller operators doing just one fragment of a chain."
Qube yesterday also said it will pay $21.4 million in scrip for the 5.3 per cent of P&O Trans Australia it doesn't already own.
Make that light or heavy?
THE dramatic softening in rare-earth prices of late has, for now at least, burnt many investors speculating on rare earth hopefuls including Lynas and California-based Molycorp.
Rare-earth elements are geo-politically strategic because of the instrumental role they play in a range of technologies, including hybrid car batteries, mobile phones, iPads and even bombs.
The issue remains that China which dominates global rare earth production has an abundance of what is known as "light" rare earths and is reported operating at less than half its mining capacity. It is the "heavy" rare earths where supply is projected to be unable to meet demand in the next decade.
It explains why the likes of Lynas are desperate to get production under way to get first-mover (outside of China that is) advantage.
But some commentators, including respected expert Jack Lifton, believe it is those with greater heavy rare earths content that will survive beyond 2015. Or in the case of Alkane Resources, the only Australian company on his admittedly Canadian-centric list, the ability to produce rare earths cheaply as a byproduct.
pwen@fairfaxmedia.com.au
At age 74, Sir Ron is set to gain control of India Equities and chair the fund after reaching a $8.3 million purchase agreement.
Frequently Asked Questions about this Article…
What takeover moves has Sir Ron Brierley made with India Equities (INE)?
Sir Ron Brierley reached an $8.3 million purchase agreement and is set to gain control of India Equities and chair the fund. INE has also launched an unconditional on‑market offer (about 4.8¢ a unit, roughly $3.9 million) for the Asset Backed Yield Trust (AYT) units it does not already own as part of its push to consolidate holdings.
Why is India Equities offering cash for Asset Backed Yield Trust (AYT) units?
INE argues a cash offer gives AYT unitholders the certainty of cash in hand rather than the uncertainty of future distributions. INE also points out that AYT has historically traded well below its net tangible asset (NTA) backing, so the premium offer may be attractive to some investors.
What is the current status of the Asset Backed Yield Trust (AYT) and its assets?
AYT has been winding up and is scheduled to be delisted on Thursday (a plan in place since September). It has largely liquidated holdings and returned capital; its remaining assets are loans made to investors in Great Southern managed investment schemes. Those loans have been significantly marked down—about three‑quarters—to roughly $3.8 million in carrying value.
How could AYT’s planned delisting affect unitholders considering INE’s offer?
AYT refused a request to postpone its delisting, arguing INE’s offer was below the units’ NTA (about 5.5¢ a unit) and that only four trading days to consider the offer was inconsistent with Corporations Act principles. If AYT doesn’t delay delisting, INE is unlikely to gain control by Thursday, although it will retain any units it has already acquired.
What did Qube announce about capital raising and investor backing?
Qube completed an $85 million placement, with cornerstone investor Carlyle Infrastructure Partners taking $50 million. Carlyle’s stake in Qube will rise from about 10% to just under 15%, providing Qube with capital to pursue acquisitions and investments across its transport and logistics services.
How does Qube plan to use the capital raised and how might that affect investors?
Qube is negotiating several acquisitions and investments to expand its 'pit to port' supply‑chain offering. Potential uses include increasing ownership of the Moorebank intermodal terminal development, adding trucking and other niche operators to create synergies, and investing in bulk‑handling infrastructure—moves that could boost scale and long‑term earnings if executed well.
What has caused recent volatility in the rare‑earths market and which companies were affected?
A dramatic softening in rare‑earth prices recently hurt speculative investors, including companies such as Lynas and US‑based Molycorp. Price falls reflected broader market dynamics and supply factors, which hit speculative positions and development plans.
What is the outlook for rare‑earths and which types of producers might be best positioned?
China still dominates global rare‑earth production and has abundant 'light' rare earths, reportedly mining at less than half capacity. Analysts say 'heavy' rare earths are more likely to face supply shortfalls over the next decade, so producers with heavy rare‑earth content or low‑cost by‑product production—such as Alkane Resources in the Australian context—may be better positioned long term.
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