DataRoom AM: ADM salvo

Joe Hockey faces pressure from all sides on GrainCorp, while demand signals froth in the IPO market.

Joe Hockey has warned anyone trying to influence his decision on the proposed takeover of grains handler GrainCorp to back off. But were his comments largely directed to his National party colleagues within the Coalition or to GrainCorp’s suitor?

Meanwhile, the buzz around the float refuses to die down, Fonterra makes an Aussie dairy play that has no ties to Warrnambool Cheese and Butter and James Packer edges closer to a Japanese entrance.

GrainCorp, Archer Daniels Midland, Joe Hockey

Archer Daniels Midland has sought to comfort growers over its planned takeover of GrainCorp as political tension rises over the group’s plans.

"When we talk about the investment that we'll make in the supply chain... and the commitments that ADM is making, we're not going to change the way GrainCorp operates, in fact we want to improve it," ADM grains president Ian Pinner said on ABC radio yesterday.

The company, on the surface, appears to have a crucial backer in Treasurer Joe Hockey who will have a final say on the deal next month. Hockey, while not drawn on the likely decision on the $3.4 billion takeover, yesterday attacked those trying to sway him.

“I will not be bullied or intimidated by anyone when it comes to dealing with the national interest,” he warned.

Hockey’s quotes appear a direct retaliation to intense pressure coming from the Nationals, and some rural-based Liberals, who are seeking to block the deal.

The Nationals, through leader and Deputy Prime Minister Warren Truss, launched an offensive against the deal over the weekend arguing a case for it being detrimental to the national interest.

“If we don’t own any of the supply chain, it’ll be very difficult for us to ever make decisions which can in fact influence whether or not our grain industry is to prosper,” he said.

The Australian Competition and Consumer Commission report into the matter didn’t elicit the same fears raised by the Nats and it would be hard for the Liberals to ignore the competition watchdog’s view at the behest of the Nats.

That said, Hockey’s comments were likely also partially directed toward ADM, which has launched a PR offensive of its own to fight off the Nationals’ concerns.

This notion is backed by comments the treasurer made on ABC’s 7.30 last night.

"I'm giving a message to everybody - everybody - including companies and others that when it comes to the national interest: the decision is made putting Australia first," he clarified.

Hockey has until December 17 to make a call.

We will be so bold as to say it will be in the affirmative, but with conditions attached. But when internal politics start to interfere, one can never be too sure.

Already there have been reports that at least one elected National Party member was prepared to resign if the green light was given. There’s a bit of pressure for you.

Online job marketplace has ceased taking orders for its IPO more than a week ahead of original plans.

The move, due to overwhelming demand, is the latest sign of froth in the IPO market.

The company, which currently earns less than $1 million in profit, is raising $15 million through a float that values the company at $218 million.

Given the heavy oversubscription it is likely the shares will trade higher initially, meaning a valuation of $250 million could easily be ascribed before the end of the year. It is quite a staggering number for a group anticipating profit of just $471,000 in the current financial year.

For those of you without a calculator handy, on a market capitalisation of $218 million the group has a price to earnings multiple of 463 times. If it climbs close to a valuation of $250 million, the price to earnings ratio will be 531.

Freelancer is a rapidly growing company and has plenty of upside, but it’s easy to argue the case that too much potential is priced in.

Freelancer will list on the ASX on November 15. 

Fonterra, Tamar Valley Dairy, Bega Cheese, Warrnambool Cheese and Butter

While everyone was looking at Bega Cheese and Warrnambool Cheese and Butter, New Zealand dairy giant Fonterra has swooped on another Australian dairy firm.

Tasmania’s Tamar Valley Dairy, which entered administration in September, has been acquired by Fonterra for an undisclosed sum, although Tamar’s contract with Coles and its new factory built to supply yoghurt to Coles were not included in the deal.

The move comes less than a week after Fonterra purchased 6 per cent of Bega Cheese as it sought a seat at the table in the latest Australian dairy consolidation.

Bega, for now, is predator rather than prey, maintaining a bid for Warrnambool Cheese and Butter.

News on that bid is expected today as Bega’s board meets to discuss its options. It is widely expected that the dairy group will go ‘unconditional’ with its offer and perhaps lift the cash component of the $2 a share plus 1.2 Bega shares bid.

A recent dip in the Bega share price from all-time highs means the dairy firm’s cash and scrip offer is now back to second best at $7.77 a share. The largest offer comes from Canada’s Saputo at $8 cash per share, while Murray Goulburn has put forward a proposal of $7.50 cash per share.

Investors in WCB still believe another bid could be forthcoming, with the company’s stock yesterday closing at $8.50.

Crown Resorts, Melco Crown

A couple of weeks ago we mentioned the heightened prospect of the Japanese government soon granting its first casino licenses.

Melco Crown Entertainment, the joint venture of James Packer’s Crown Resorts and Lawrence Ho’s Melco Group, has long harboured ambitions to expand into the country and the recent moves in Japan have not been lost on Ho.

"This is the closest Japan has ever gotten to liberalising gaming markets,” he noted.

Mr Ho said Melco Crown was assessing inquiries from several significant companies in the sector to work together on Japanese projects. Getting a seat at the first table, however, might be a challenge.

The key is how quickly will a country that has long avoided casinos proceed with development? Will they adopt the current Singapore model of just two or given the relative size of Japan, allow for several more?

There’s also the potential for intervention to ensure Japanese companies play a role in development. Indeed, finding the right joint venture partner for Melco Crown may now be the most crucial step for Ho and Packer.

Meanwhile, the Japanese Parliament will weigh the option of licenses before the end of the year.

Wrapping up

Vodafone Hutchison Australia has reportedly pulled out of the race for AAPT after taking a closer look at its business, according to The Australian Financial Review. The frontrunner for the on-again, off-again sale is considered to be TPG Telecom.

In resources, Linc Energy’s shareholders have approved the company’s delisting from the ASX. The energy firm will now push ahead with plans to list on the Singapore Exchange on December 6.

In finance, AMP Limited is hoping to raise $200 million through the listing of subordinated, unsecured debt securities. The securities will begin trading on December 19, with the funds to “optimise the efficiency of AMP’s balance sheet”. A fancy way of saying “we need more cash”.

Meanwhile, National Australia Bank is reportedly planning to launch a $500 million hybrid offer to boost its tier-1 capital ahead of the introduction of Basel III regulations.

Finally, Amcor Limited has said it will buy two million shares on-market in the next few weeks to meet employee share plan obligations.

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