DataRoom AM: BHP’s nickel appeal

Two frontrunners have reportedly emerged in the race for BHP’s Nickel West assets, while a higher takeover bid for Treasury Wine Estates is looking more and more doubtful.

Two big names are believed to be left in the race for BHP Billiton’s Nickel West operations, but what sort of return can the mining giant expect given the environmental liabilities linked to the division?

Elsewhere, the signs aren’t good for a higher takeover bid for Treasury Wine Estates, Fairfax Media nullifies talk of a merger with Nine Entertainment and Westfield spinoff Scentre Group mulls a shakeup of its portfolio.

BHP Billiton has entered into discussions with Chinese nickel refiner Jinchuan Group and Swiss-based trading giant Glencore over the potential sale of its Nickel West operations, The Australian Financial Review has said. The latest speculation suggests Jinchuan is largely attracted to the Kalgoorlie smelter, while Glencore is particularly interested in the Kwinana refinery.

The preferences of the two preferred suitors could see BHP split the sale in two, though a deal will only proceed if the entire group of assets can be shunted. A valuation on a sale is seen to be fraught given the potential for environment liabilities to hit $2 billion, but consensus estimates reportedly hover between $350 million and $400m, with UBS an outlier thanks to a negative $800m valuation based on environmental liabilities attached to any deal.

Meanwhile, takeover target Treasury Wine Estates has reportedly failed to draw much attention from hedge funds, which usually attempt to crowd the register of any company at the centre of a bidding battle. According to the AFR, there are few signs of hedge funds showing up on the company’s register, a sign that confidence on a deal is not particularly high. Further highlighting this is a share price that, at current levels of $5.15, proves investors are not convinced an offer above the indicative $5.20 a share bids from KKR and TPG will be forthcoming.

While takeover talk is subdued at TWE, it has been quashed entirely at Fairfax Media, with the media group dismissing recent speculation it would make a play for a near 15 per cent stake in Nine Entertainment. Rumours had centred on the prospect of Fairfax gaining a board seat at Nine as the precursor to a landscape-changing merger.

The news comes as Fairfax has offloaded its Tullamarine printing facility to ADX Management for $20m. The firm had earlier been close to a $25m deal with White Data, but Fairfax was forced to shop the asset around elsewhere after talks broke down.

Pacific Brands has, as expected, decided to rid itself of its underperforming workwear division, offloading brands like Hard Yakka and KingGee to Wesfarmers in a $180m deal. The sale, which still requires ACCC approval, comes after a months-long strategic review run by Macquarie, with expectations more asset sales could be forthcoming in the near-term. However, the firm’s key brands Bonds and Sheridan appear set to stay despite recent rumours to the contrary.

In the IPO market, Pacific Smiles Group is looking to raise over $100m through an IPO before the end of the year. The eastern state-based dental care firm is hoping to capitalise on strong investor demand for healthcare offerings.

In property, first-round bids for Devine have tumbled in, with the AFR reporting muted interest in the ASX-listed group. AV Jennings is viewed as a frontrunner should a deal go through, with Stockland also potentially in the mix. Devine was essentially put on the market last month after majority shareholder Leighton Holdings announced plans to sell its 50.6 per cent stake.

Also in property, recent Westfield spinoff Scentre Group has indicated it could pursue acquisitions to capitalise on “growth corridors” in Australia and New Zealand, according to Bloomberg. While purchases are on the agenda, the firm is also mulling divestments, with the 85 Castlereagh Street building -- which serves as Scentre’s headquarters and the Sydney offices of JP Morgan -- potentially on the block.

Elsewhere, the ability of troubled mining services group Boart Longyear to operate as a ‘going concern’ remains under a cloud, with the firm confirming it remains in talks with potential investors over recapitalisation options. Boart said it was “optimistic” on the latest developments, but the clock is ticking.

Finally, juice maker Nudie Foods has confirmed it has tapped UBS to assess takeover offers but is in no rush to sell if offers fail to meet internal valuations, while Commonwealth Bank of Australia has wrapped up a mammoth raising of $2.6bn through the issuance of new hybrid notes.