ConsMins saga not over yet

ConsMins. This is the takeover that keeps on coming. To recap, last week we saw Pallinghurst increase its bid for the second time. The first time was from $3.30 to $3.60. Then Privat, from the Ukraine, came in with a bid of $3.95. At this point Pallinghurst re-entered the fray with a bid of $4.10 a share. On Friday the stock closed at $4.31, a 5% premium to the current bid. What we have here is two very committed bidders looking to secure the last large-scale manganese deposit in the world. Anybody who has ever been to a hotly contested auction of a unique property will recognise the similarities in this particular situation.

Pallinghurst’s approach has been very unusual. It has announced that in the event of another bid emerging, Pallinghurst will pay those shareholders who have already accepted the Pallinghurst bid the difference in a special “top up” payment. For example, if Privat returns with a bid of $4.30 then Pallinghurst will pay those shareholders who have accepted the bid of $4.10 an additional 20¢ a share. Now I don’t think this will stop Privat from bidding. It’s just that it’s the first time I’ve seen that particular clause in an Australian takeover.

Of course, the Norwegian company Tinfos, which owns a decent stake, hasn’t yet stated its intentions, but I believe it has done its due diligence so there are still two potential bidders for the company. The floor on this one is probably the $4.10 that Pallinghurst has offered so I’d say the downside is relatively limited and there could be a bit more upside. There’s no real point in accepting Pallinghurst bid at the moment. It’s worth hanging in there because it’s not over yet.

Symbion. As we know, Primary has bought just under 20% of the company and the big shareholder vote on the Healthscope merger proposal is on tomorrow. I don’t think that the vote for Healthscope is going to get up and I understand that there are all sorts of discussions going on behind closed doors, there’s still a possibility of Primary and Healthscope doing some sort of a deal although the issue is that they both want the better assets out of Symbion and a deal where one company doesn’t end up with those assets is going to be a viewed as a failure by that company.

The feeling is that Primary will probably just launch its own bid. It may have a cash or scrip component, so I think at this point we’ll have to see how tomorrow’s vote goes – although to be honest, if they know in advance that they’re going to lose, they might call it off.

Rio Tinto. Now the rumour last week was that BHP Billiton was going to team up with CVRD, a very large Brazilian company, to take over Rio Tinto. Rio’s share price has been showing some weakness recently and on the back of that rumour the Rio Tinto share price went back through $100 a share.

Looking at the prospect on face value, BHP and CVRD could certainly mount a bid for Rio Tinto. It’s not beyond them financially. But the aspect that people seem to be missing is that BHP and CVRD are extremely fierce competitors. They’re both major suppliers of iron ore and it’s difficult to see how they could divide the assets up amicably.

There has been some comment that if Rio Tinto can successfully acquire Alcan then it would be takeover proof. This is just not true. It’s a big acquisition, certainly, but not impossible. In fact, it took me a while to work out why Rio Tinto wants Alcan because its very expensive. I think that it’s because aluminium production is a very power-intensive process. It uses enormous amounts of power and in countries such as Australia and China that power is largely coal-fired. In Alcan, it’s almost all hydro-electric. So what Rio is buying long term is aluminium producing assets that are powered by a relatively green source of electricity.

But back to the issue at hand. Would it make Rio takeover proof? No it wouldn’t. It would be taking on debt but it’s not that massive, so this idea that it can’t ever be taken over is wrong. And the idea that, therefore, BHP and CVRD will team up and have a crack at Rio, I also believe is also wrong. I also think that the Chinese Government might have something to say about that because as a customer of all three organisations, you might feel compromised if two of them suddenly co-operated to acquire the third. Personally I’m sceptical about the whole BHP and CVRD combination story.

Coles. Wesfarmers came out last week and added a small sweetener to the deal because the deal is about 70% scrip. They’re going to make half of it ordinary shares and half of it the special Wesfarmers price protected shares. What this means is that in four years’ time if Wesfarmers has traded as low as $36 a share, you’ll get some extra Wesfarmers shares to top up your holding. It’s probably worth 25¢, maybe 30¢ per Coles share, so Wesfarmers has chucked a little bit of extra insurance on the table for accepting shareholders. The fact is, in four years’ time if Wesfarmers shares are below $36 then the whole transaction’s been a giant failure anyway and if they’re above $45 you don’t get any extra shares. (To discover a cheap way into Wesfarmers stock, see today's feature by Mike Mangan).

InvestorWeb. Another interesting takeover at the moment is InvestorWeb. Commonwealth Bank has made a bid is $6.45 a share and the stock is trading at about $6.31. CBA wants to fold InvestorWeb in with its CommSec operation. It’s the last large independent stockbroking or online stockbroking research firm. Now there’s an interesting precedent here: when ANZ bid for E-Trade about a year ago it was forced to increase its bid. I think there’s a fair chance Commonwealth Bank might have to pay up or, indeed, that one of the other banks might have a go at it. In any case, it can be bought for below a cash bid price that the Commonwealth Bank won’t have any problem in coughing up more if it has to, so it’s a nice low-risk sort of transaction.

Market volatility is still very high and I think we find the trick is during these periods is to look for those cash takeover bids because if they get a little bit cheaper that’s usually the time to buy them. What we’ve seen in the past two months is the spread on both cash and scrip bids widen. So what we’ve seen, let’s say, a bid like Kimberly Diamonds, it’s a 70¢ bid. The spread here has widened from 68¢ to as low as 64¢ and it’s not like the deal’s going to fall over. I take the view that that’s an opportunity.

nTakeover Action September 3-7, 2007
Date	Target	ASX	Bidder	(%)	Notes
3/09/07	Auspine	ANE	Gunns	60.80	Unconditional.
9/09/07	Australian Hotel Fund	AHO	Barana Group	47.80	Plus acceptance indication from 19.9% shareholder.
12/07/07	Avantogen	ACU	Chopin Opus One LP	84.98	Diluted from 87.62%.
27/08/07	Becker Group	BKR	Prime Television .	76.04	Unconditional. Extended to July 26.
30/08/07	Consolidated Minerals	CSM	Territory Resources	0.01	Offer confirmed.
29/08/07	Consolidated Minerals	CSM	Pallinghurst Resources/AMCI	5.46	$3.30 recommended cash offer.
31/08/07	Consolidated Minerals	CSM	Palmary Enterprises	0.00
13/08/07	Golden China Resources Corp	GCX	Sino Gold Mining	5.30	Lock -up agreement
27/08/07	Costa Exchange	CHQ	Costa Exchange Holdings	80.93
4/09/07	Golden West Resources	GWR	Fairstar Resources	0.00
26/07/07	Mackay Permanent Building Society	MPB	Wide Bay Australia	15.65
29/08/07	Multiplex Group	MXG	Brookfield Group	61.72
6/09/07	Nova Energy	NEL	Toro Energy	1.61	Plus 66.6 pre-bid indications of acceptance.
5/09/07	OmegaCorp	OMC	Denison Mines Corp	98.50	FIRB approval.
28/02/07	Queensland Gas	QGC	TCW/Societe Generale	0.00
5/06/07	Rocklands Richfield	RCI	Bowen Energy	0.00
5/09/07	Sydney Attractions Group	SAQ	Village Roadshow	19.96
7/09/07	travel.com.au	TVL	Webjet	19.90
21/06/07	Vietnam Industrial Investments	VII	Prudential Vietnam Securities Investment Fund Management Co and VII director Henry Lam Van Hung	0.00
10/08/07	Vietnam Industrial Investments	VII	Corbyns International	19.30	Off-market offer.
nScheme of Arrangement
9/08/07	Adelaide Bank	ADB	Bendigo Bank	0.00	Vote November.
6/09/07	Auckland International Airport	AIA	Dubai Aerospace Enterprise	0.00	Merger proposal terminated.
4/07/07	Bolnisi Gold NL	BSG	Coeur D'Alene Mines Corp	19.99	No vote date set. Due diligence completed
27/08/07	Centro Shopping America Trust	CSF	Centro Retail Trust	0.00	Vote mid-October.
5/09/07	Coates Hire	COA	National Hire Group	0.00	Offer rejected.
5/09/07	Coles Group	CGJ	Wesfarmers	12.10	Vote October 25. ACCC not to oppose scheme. Offer enhanced.
16/08/07	Colonial First State Private Capital	CFI	SunSuper Superannuation Fund	18.75	Pre-bid support. Vote November.
6/09/07	HPAL	HPX	Salmat	0.00	Vote October 17.
22/08/07	Investa Properties	IPG	Morgan Stanley Real Estate	0.00	Shareholders approve scheme.
1/08/07	IWL	IWL	Commonwealth Bank of Australia	13.96	Vote October.
3/08/07	Lipa Pharmaceuticals	LIP	CIC Life Sciences	0.00	Vote October.
30/08/07	Mackay Permanent Building Society	MPB	Bank of Queensland	0.00	Scheme booklet due October. Due diligence satisfied.
6/08/07	Oriel Communications	OCO	FCP Brencorp	0.00	75% acquisition proposed. No vote date set. Implementation agreement signed.
23/08/07	Orion Telecommunications	OTL	M2 Telecommunications Group	0.00	Vote September 24.
7/09/07	Southern Cross Broadcasting (Australia)	SBC	Macquarie Media Group	16.40	ACCC to assess acquisition. Vote October 19.
15/08/07	Symbion Health	SYB	Healthscope	11.10	Vote mid-September. ACCC not to oppose.
nForeshadowed Offers
31/08/07	Anzon Australia	AZA	Unnamed parties	0.00	Conditional approaches.
16/08/07	Atlas Group	AHS	Former director Peter Smaller and associates	0.00	Discussions confirmed.
3/09/07	Auckland International Airport	AIA	CPP Investment Board (Canada Pension Plan)	0.00
13/08/07	Ausdrill	ASL	Expression of interest	0.00	$2b party withdraws. Discussions with another party.
12/06/07	Great Southern	GTP	Unnamed party	0.00	Expression of interest.
2/07/07	Great Southern	GTP	Unnamed parties	0.00	Interest from other partes - following previous expression of interest.
27/06/07	Health Corporation	HEA	Unnamed party	0.00	Non-binding terms sheet.
9/08/07	Panbio	PBO	Medical Innovations (Inverness)	0.00	34c bid not considered adequate.
9/08/07	Panbio	PBO	Unnamed parties	0.00	Other parties invited to carry out due diligence, along with Medical Innovations.
31/08/07	Viking Industries	VKI	Provik shareholder consortium	0.00	Conditional offer at $1.09. Offer due in September.
29/06/07	Warehouse Group	WHS	Woolworths	0.00	NZ Commerce Commission declines approval of an offer. Woolworths appeals to NZ High Court.
29/06/07	Warehouse Group	WHS	Foodstuffs Co-operatives	0.00	NZ Commerce Commission declines approval of an offer. Foodstuffs appeals to NZ High Court.
21/08/07	Webster	WBA	Futuris Corporation	29.49	Cash exit offer for any shareholder.
nBackdoor Listing
31/08/07	Mark Sensing	MPI	Sonofax Holding	63.00	Due diligence continues. Vote due November.