DataRoom AM: Cow tipping

Canadian suitor Saputo is expected to make a renewed bid for Warrnambool Cheese while credit checking group Veda eyes an IPO.

The eagerly anticipated next bid for Warrnambool Cheese and Butter could arrive today, with Canada’s Saputo ready to trump the offer of Murray Goulburn. While the dairy giant hopes that will put an end to the bidding war, another chapter appears likely to be written before long.

Meanwhile, December looks like being a massive month for IPOs as Veda and Pact Group join the likes of Nine Entertainment and Dick Smith Electronics in seeking an ASX listing. Elsewhere, BHP Billiton offloads non-core assets, the government sets a February end date for its Medibank Private scoping study and James Packer glimpses an opportunity in Japan.

Warrnambool Cheese and Butter, Saputo, Murray Goulburn, Bega Cheese

Investors were confident Murray Goulburn’s intervention in the battle for Warrnambool Cheese and Butter would not prove the last bid, and they appear to have been proven right.

According to The Australian, Canadian dairy giant Saputo will today raise its offer by $1 per share, from $7 to $8. The move will see it clear the rival MG proposal by 50 cents a share and boost the value of the deal close to $450 million.

It was only early September when the takeover premium from Bega Cheese put the price-tag at around $320 million.

The Saputo move was widely expected as soon as MG tipped its hat into the ring, but there’s still a way to go in the increasingly exciting battle.

Next week we should hear word from the ACCC as to whether it would stand in the way of a Bega purchase of WCB. Assuming approval is granted, Bega will then have rid itself of all barriers to the deal. The only problem will be finding a deal that could match Saputo’s in the eyes of the WCB board.

MG, too, may look to go higher, though a deal above Saputo’s will leave it with a heavy debt load.

Complicating any deal is that MG and Bega hold a combined 35 per cent in WCB, which could act as blocking stakes. The other issue is that of competition regulation. MG will need to wait a few months before finding out whether it will receive clearance from the Australian Competition Tribunal, while Saputo has the Foreign Investment Review Board hanging over its head.

WCB’s shares finished basically flat yesterday and 2 per cent higher than the rumoured new offer from Saputo.

Veda, Pact Group, Pacific Equity Partners, Amcor

Credit checking group Veda is set to list on the ASX in early December, with a valuation of around $1 billion.

Australia’s largest private equity group, Pacific Equity Partners, is looking to raise $340 million through the issuance of new shares. It will hang onto 60 per cent of the firm once listed.

UBS and Citigroup, meanwhile, have landed the plum roles as lead advisors in one of the bigger floats of the year, with cornerstone investors already secured.

Veda will have to fight for the market’s attention, however, coming on market around the same time as several other big name floats including Nine Entertainment and Dick Smith Electronics. The Australian Financial Review believes Pact Group could also be vying for the love of the market in December, with a $2 billion float possible before Christmas.

Run by Raphael Geminder, son-in law of the late Richard Pratt, Pact reportedly hired Credit Suisse and Macquarie Group to advise on an IPO a few weeks ago. According to the latest reports, Geminder wants to list before the demerger of rival Amcor goes through, which means we should see it on the ASX before December 18.

Amcor, meanwhile, has settled on a name for its soon to be demerged Australasia and Packaging Distribution business: Orora.

BHP Billiton

BHP Billiton is ramping up its focus on core assets, with moves to sell part of its US shale acreage.

The miner will offload around half its acreage in the Permian Basin with recent prices for similar acreage potentially offering BHP a chance for an $800 million payday. That, however, may prove optimistic as valuations fluctuate wildly based on factors including the quality of the acreage.

The decision comes on the back of a retreat from the oil and gas sector in India and as its aluminium and nickel assets are reportedly open to offers.

The world’s biggest miner, which expects commodity demand to climb 75 per cent in the next 15 years, is also in talks to offload its stake in the Mount Nimba iron ore deposit in Guinea. B&A Mineracao was considered close to securing a deal in December last year, but nothing has yet been confirmed with BHP advising that “the discussions continue”.

At its London AGM overnight, meanwhile, the company said it was looking to find partners for its massive $14 billion Jansen potash project, with discussions already underway. As it stands, Jansen is unlikely to come into production until at least 2020.

Medibank Private

A scoping study on Medibank Private will be completed by February, the government has advised, as it pushes ahead with plans to float the valuable asset.

The study is due to start by the end of November and conclude by the end of February.

A tender process will begin next week to appoint advisers and given the size of the company, investment banks will be climbing all over each other to get a slice of the action.

Lazard is considered a frontrunner in light of its work on the two previous Medibank scoping studies, but it isn’t a sure bet given the last one was carried out seven years ago. Indeed, the government may be seeking a fresh set of eyes.

Finance minister Mathias Cormann said the timing and means of sale are yet to be determined, though an IPO is considered to be more likely than a trade sale.

It could reap $4 billion, according to several reports, though as we indicated yesterday, on current earnings it’s hard to justify a price-tag much higher than $3.5 billion. That said, a business is worth what anyone is prepared to pay and given the IPO buzz, $4 billion is a possibility.

The health insurer is almost certain to be the only big ticket privatisation on the Abbott government’s first term agenda, with Australia Post left in the too hard basket.

It might not be the only privatisation, however, with New South Wales premier Nick Greiner calling for the offloading of the Australian Rail Truck Corporation, according to The Australian Financial Review. The rail network has been mooted as one of two other likely privatisations in a first term Abbott government.

James Packer, Crown Resorts

James Packer and his gambling empire may have met some resistance in Sri Lanka this week, but he has received some good news in Japan.

Yesterday a multi-party group of lawmakers said it would submit legislation to overturn the country’s ban on casino gambling, paving the way for a potential change within the next few months. According to the Financial Times, it could allow for casinos to be built before the 2020 Olympics.

Packer-related entity Melco Crown flagged its intentions for a Japan expansion earlier this year, with Packer making the case that it would be the world’s second biggest gaming market in the world.

Wynn Resorts, MGM Resorts International, Las Vegas Sands and Caesars Entertainment have also hinted at interest in Japan and if the country begins by going down the route trekked by Singapore – opening just two casinos – then Packer and partner Lawrence Ho will have a fight on their hands. Perhaps another joint venture could be on the cards.

A decision in Sri Lanka, meanwhile, is now not expected for a month, with tax concessions to be confined to the hotel operations.

Wrapping up

Pacific Equity Partners doesn’t just have the Veda float to worry about, with the private equity firm also close to selling clothes hanger and packaging firm Braiform, according to The Wall Street Journal. Braiform has separated from former parent Spotless Group, which PEP purchased in 2012, and is believed to be sought after by its management team.

In the mining sector, Sandfire Resources has indicated it would be happy to help major shareholder Oz Minerals reduce its 19.2 per cent stake in the copper miner should Oz want out, according to The Australian. Recent troubles at Oz Minerals have raised questions about whether it might sell down its Sandfire position in order to improve its cash to debt profile.

In oil & gas, the long awaited sale of BG Group’s pipelines linked to its $20 billion Curtis Island project in Queensland will not take place until well into next year, according to the AFR.

Finally, UK billionaire Joe Lewis has upped his stake in the Australian Agricultural Company leading to speculation he may pursue a takeover, according to the AFR. AACo has long been considered a takeover target due to the strong interest from overseas for Australian agricultural assets.

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