Dataroom AM: Cheesed off

PwC finds itself on both sides of the argument in the Bega-WMC stoush, while BHP Billiton shows its muscle.

Warrnambool Cheese & Butter Factory directors don’t like the stink coming from the scrip of Bega’s $319 million takeover offer. WCB likes the taste of cold hard cash like the rest of us. Meanwhile, BHP is leaning on bond issues again, our new Trade Minister says the world will be watching the GrainCorp decision and two local healthcare focussed companies chalk up deals overseas.

Warrnambool Cheese & Butter Factory, Bega Cheese

The Warrnambool Cheese & Butter Factory board has told shareholders they should reject the $319 million takeover offer from major shareholder Bega Cheese for a variety of reasons, but the reliance on scrip is a major factor.

The directors unanimously recommended investors turn down the Bega offer, which is $2 a share in cash and 1.2 Bega shares for a total value of $5.78 a share pre-bid.

Since the deal was announced Bega shares have added to a recent rally, which has in turn pulled the WCB share price higher. However, WCB isn’t so impressed by that.

“Bega’s offer is timed to exploit recent gains in Bega’s share price,” said WCB in a statement to the market.

“The offer consideration is uncertain and there are risks in owning Bega shares. The timing of Bega’s offer is highly opportunistic and fails to reflect the value of a number of recent business improvement initiatives undertaken by WCB.”

The suspicions about Bega’s share price movements are pretty well founded. Between mid-August and the day before Bega lodged its bid earlier this month, the suitor’s share price rallied 15 per cent while WCB literally didn’t move.

Now of course both share prices have risen significantly, but WCB has to look at the context leading up to the deal when there’s so much scrip involved.

WCB rejected a $180 million takeover offer from Murray Goulburn back in 2010; it’s a decision that’s been vindicated by Bega’s far superior offer in 2013.

If you want to feel for anyone in this encounter, it should be PricewaterhouseCoopers. The accounting firm is the auditor of Bega, but WBC has called it in for its defence as well.

Awkward much?

BHP Billiton

Mining giant BHP Billiton has conducted its fourth global bond issue in a little over a year, raising a total of $US5 billion ($5.32 billion).

Barclays, Goldman Sachs and JPMorgan managed the issue that was a combination of floating and fixed rate bonds.

BHP has $US500 million of senior floating bonds at 25 basis points above the London interbank rate which are due in 2016. On top of that the investment banks issued $US500 million in senior notes for 2018 at 2.05 per cent, $US1.5 billion due in 2023 at 3.85 per cent and $US2.5 billion due in 2043 at 5 per cent.

Thirty years at 5 per cent. BHP really is good for it these days.

GrainCorp, Archer Daniels Midland

The Coalition’s main spokesperson on the matter of foreign investment says the world will be watching when Treasurer Joe Hockey announces his decision on Archer Daniels Midland’s bid for GrainCorp.

Speaking to The Conversation, Minister for Trade and Investment Andrew Robb said the decision will be closely monitored by international investors.

“It will be watched, mark my words, it is being watched by the international investment agencies and companies,” said Robb.

Australian treasurers always seem to get one deal that really challenges their foreign investment instincts. Peter Costello had Shell’s run at Woodside Petroleum, which he knocked back. Wayne Swan had Singapore Exchanges ‘merger’ with Australian Securities Exchange, which he knocked back.

The unusual thing about ADM and GrainCorp from Hockey’s point of view is that it uniquely touches on the greatest point of contention between Coalition partners, the Liberals and the Nationals, and it comes so early in the new term of government.

Sonic Healthcare, Ansell

Pathology and radiology company Sonic Healthcare is adding to the push from Australian healthcare companies into Europe with the purchase of Germany’s Labco, a laboratory business, for 76 million euros ($110.58 million).

Labco owns five labs in west and south west Germany, which generate a total of 53 million euros ($77.11 million),

Sonic already has six pathology businesses in Germany and Labco will be corralled into the company’s business as quickly as possible.

Meanwhile, Ansell is paying more than $US40 million ($42.9 million) to purchase a South Korean glove maker called Midas.

This shows how managing director Magnus Nicolin wasn’t mucking around when the company released its latest set of results on August 19.

“Acquisitions continue to be a priority for the business,” Nicolin said yesterday. “The M&A route is very attractive, providing you are selective...and then move quickly to integrate, which is what we intend to do.”

Nicolin secured four acquisitions last year including Hercules from Brazil and Comasec in England.

Wrapping up

The rollroad sales drive continues with Sydney’s troubled Cross City Tunnel officially put up for sale.

Lender Royal Bank of Scotland didn’t even think about hitting the brakes after securing control last week. The newspaper reports that Kordamentha and UBS have been tapped to run the sale.

Soul Pattinson billionaire Robert Millner has raised the stakes in his battle with Dart Energy.

SoulPatts has lodged a notice indicating that Millner will use the 16.4 per cent stake in Dart held by New Hope (SoulPatts and New Hope have a famous cross-shareholding arrangement) to push for the removal of four directors to be replaced by Millner and three independents.

And finally, the Australian Capital Territory could join the rest of Australia’s states of territories (with the exception of Western Australia) by selling off its totalisator better business.

The home of Australia’s capital will consider offers for the struggling business after a recommendation from PricewaterhouseCoopers to offload it.

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