DataRoom AM: Equity theory

An ACCC decision could put the kibosh on Perpetual's Trust Company tilt, while WCB warns on Bega's advances.

Equity Trustees has extended its offer for The Trust Company as everyone sweats on what the ACCC has to say about leading bidder Perpetual. Meanwhile, Warrnambool Cheese & Butter Factory is reportedly writing to shareholders with some cautious words about Bega (though nothing definitive), BHP Billiton and Rio Tinto need to drop their prices if they really want to flog unwanted coal assets, according to New Hope, and Fortescue has done yet another debt-reducing deal.

The Trust Company, Equity Trustees, Perpetual, IOOF Holdings

Equity Trustees has extended its offer for sought after takeover target The Trust Company until November 29 as it jostles for superiority with rival bidders Perpetual and IOOF Holdings.

In a statement to the ASX, EQT emphasises that its synergies would come in at $11 million to $15 million, which is higher than the ‘supportable’ estimation from Ernst & Young of $7.5 million.

“EQT is still confident that the previously estimated level of cost synergies is achievable,” EQT boss Robin Burns said in the statement.

“There are many opportunities for the combined company to grow revenue and market share. Overall, we believe that synergies are likely to be at the top end of our estimated range.”

But before any of this plays out, EQT will be hoping that the consumer watchdog comes back with an unfavourable ruling on the prospect of Perpetual taking out Trust Co for $247 million.

The Australian Competition and Consumer Commission is due to show its hand on Thursday.

Warrnambool Cheese & Butter Factory, Bega Cheese

The Warrnambool Cheese & Butter Factory board will reportedly write to shareholders saying they will not recommend shareholders accept or reject the $319 million takeover offer from Bega Cheese until it releases its target statement.

That is due to land in mid-October, but the WCB board will perhaps give us a taste of what that might say with a suggestion that the Bega offer isn’t compelling value.

The Australian Financial Review understands that WCB will tell shareholders this week that the company’s earnings will improve significantly in 2013-14. That’s often part of the groundwork for rejecting a suitor on the grounds that the current offer doesn’t reflect its potential.

BHP Billiton, Rio Tinto, New Hope

Is New Hope needling the mining giants for a bargain, or are BHP Billiton and Rio Tinto asking too much for their unwanted coal assets?

That’s the obvious question following comments from outgoing New Hope chief executive Robert Neale, who’s widely respected for getting his company $2.45 billion for its New Saraji coal assets, which were purchased by BHP and Mitsubishi in 2008.

That was a bloody good price, even in those heady days.

Now the big miners are getting thrifty with their dosh and non-core assets are being put up for sale by the shipload.

Speaking to AAP, Neale argued that the fact no big coal mine sales in Australia have been done since this shift in mindset proves the sellers are asking too much.

“We always look at opportunities as they arise, however there still needs to be a reality attack on some of the valuations,” he told the newswire.

The observations from onlookers with an obvious conflict of interest always need to be taken with a grain of salt. New Hope has some money to spend and could be a buyer for some of the maligned coal assets in Australia. But it’s a buyer’s market.

On the flipside BHP, which is thought to be considering selling its Crinum mine, and Rio are not to be pushed around. If they want to wait to see coal prices improve a little before offloading assets, that’s their prerogative. If that scenario played out, values considered pricey today will be reasonable tomorrow.

Fortescue Metals Group

Iron ore miner Fortescue Metals Group has done yet another deal to lower its debt levels.

Andrew Forrest’s third force has spent $140 million to pay out holders of high interest preference shares that were issued during the global financial crisis.

They were steep. The preference stock, issued in September 2008, has a fixed coupon of 9 per cent and will be redeemed entirely on November 11.

This comes on the back of a $10 billion refinancing with its syndicate lenders and the successful closure of the highly lucrative notes to one of its founding supporters Leucadia National.

Wrapping up

Private equity firm Ironbridge has reportedly appointed Morgan Stanley to run through refinancing and “potential strategic review” scenarios for Healthbridge, which is a smaller rival to recently listed Virtus Health.

And finally, Eden Energy has rekindled a terminated deal with London’s Shale Energy to offload its UK assets via a cash and scrip deal worth $19.3 million.

Eden will take a 29.9 per cent stake in Shale after spinning off its English and Welsh coal seam methane and shale gas portfolio into the British player.

The ASX-listed company’s shares spiked 27.3 per cent on the news. Not bad eh!!