DataRoom AM: Leighton load-up

Hochtief has again climbed the register at Leighton Holdings in what appeared to be a show of support in light of recent events, but in reality was no more than coincidental. More crucially, what is the endgame for the company? Elsewhere, Brambles continues to push forward with its Recall demerger, RHG weighs a revised takeover deal from Resimac, Caltex offloads its bitumen division and Linc Energy shareholders get some good news.

Leighton Holdings, Hochtief, ACS

On the surface the turmoil at Leighton Holdings doesn’t appear to be scaring away its major shareholder Hochtief, which has again upped its stake in the engineering group. The German giant recently increased its holdings from 56.39 to 56.52 per cent, buying $8.5 million worth of shares at around $19.

The news led most commentators to assume Hochtief – and by default its major shareholder, Spain’s ACS – was capitalising on weakness in the Leighton share price. On the contrary, however, as the shares were actually picked up on September 25 and 26, before reports of the bribery scandal broke.

With Leighton stock ending trade yesterday at $17.28, Hochtief has a $750,000 paper loss on its latest two week investment. It gives further reason for the major shareholder to feel aggrieved about recent events.

The 0.13 per cent purchase was all Hochtief could chase at that point in time as creeping acquisition law dictates a major shareholder can only buy a maximum of 3 per cent of a company every six months without launching a full takeover.

When Hochtief started its most recent Leighton buying in June, the company held a 53.5 per cent stake. In other words, the only way for Hochtief to now take advantage of recent softness in Leighton’s share price is to pursue a long awaited takeover.

Investment banks have been spruiking this as a possibility in recent weeks, but ACS and Hochtief will likely want to let the dust settle on the bribery allegations before mulling a move. The Spanish group retains a heavy, if decreasing, debt load and while a three-pronged global behemoth may be on the cards in time, it is likely to be a while off yet.

RHG, Resimac, Australian Mortgage Acquisition Company, Pepper Australia, Cadence Capital

Shares in home loans group RHG are in a trading halt as its board weighs up a revised takeover offer from the Resimac-Australian Mortgage Acquisition Company syndicate, details of which are not yet clear.

Resimac-AMAC and a Pepper Australia-Cadence Capital consortium are stuck in a drawn-out, complex wrestle for control of the remnants of the former RAMS Mortgage Corporation, whose brand name was acquired by Westpac in 2007.

In late August RHG accepted the Resimac deal over the Pepper-Cadence offer, pending an independent expert’s review and in the absence of a better offer coming forward. Since then, Cadence and Pepper have announced two improvements to their offer, clouding the decision for the RHG board.

In the meantime, Resimac-AMAC have, for their part, tried unsuccessfully to call in the Takeovers Panel to rule on a potential conflict of interest faced by Cadence given its significant 17 per cent shareholding in RHG. The government body refused to be drawn into the debate, leaving the RHG board with a difficult decision to make.

Reports suggest the board was debating the new Resimac offer well into the night, with a decision likely by Thursday when its stock is due to exit the trading halt.

Brambles, Recall

Executives at Recall are on an Asian mission to stir interest in its $1.5 billion to $2 billion demerger from parent Brambles, according to the Australian Financial Review.

Early this month Brambles announced the appointments of Neil Chatfield and Tahira Hassan to the Recall board in preparation for its listing. At the same time the company advised the scheme book was on track for release by the end of October, with the demerger to be finalised before year’s end.

It will be second time lucky for Brambles and Recall after a demerger was pulled in June 2012 as the company felt the offers, reportedly of around $2 billion, “did not reflect its value or offer sufficient certainty”. This time around it is going for a listing rather than a sale and given the current appetite for floats on the ASX, the spin-off is taking place at a good time. The 20 per cent Recall profit fall in the 2013 financial year, however, means it is going into the spin-off a little cold.

In the meantime the Recall board is coming together, with Chatfield and Hassan joining chairman Ian Blackburne, who has a history with demergers thanks to his position as chair of CSR when it separated its sugar business in 2010.

Linc Energy

Long suffering Linc Energy shareholders had something to cheer yesterday, with the group’s stock surging 17 per cent. It’s been a tough few weeks for investors in the group after Linc boss Peter Bond informed the market of plans to delist from the ASX and pursue a float in Singapore instead. Incidentally, part of the reason for the exit was the volatility in the company’s stock, which has only worsened since the announcement.

The reason for yesterday’s lift was two-fold. First, there were reports the company will spin off its coal business, which was boosted with the recent acquisition of Rio Tinto’s mothballed Blair Athol mine in Queensland. According to the AFR, the coal business, too, will be listed on the Singapore Exchange.

Also boosting the share price was a revaluation of the company’s CO2 to oil project in Wyoming to $US1.14 billion ($1.2 billion).

Caltex Australia, Puma Energy

Caltex Australia has signed a contract to offload its Sydney-based bitumen business at the end of the year. The terms with buyer Puma Energy have not been released and the deal remains conditional on approval from the Foreign Investment Review Board, although that appears a formality.

Caltex hinted to investors the move was always on the cards after it closed its Kurnell oil refinery in 2010.

“While we had an operating base oil refinery at Kurnell (Sydney), having the bitumen business made sense,” managing director Julian Segal explained.

“Going forward, however, bitumen is no longer deemed to be a core business.”

Puma, meanwhile, has been on a shopping spree of sorts, buying Central Combined Group, Neumann Petroleum and Ausfuel this year.

Wrapping up

Fortescue Metals Group founder Andrew Forrest has said he will not be selling down his one-third stake in the iron ore miner in the near future despite pursuing a plan to give away most of his wealth, according to the AFR.

Meanwhile, Ten Network-affiliated Southern Cross Holdings has begun negotiations with lenders to refinance $725 million worth of debt, according to the AFR. The company is in no rush, with refinancing not due for around 18 months’ time.

Finally, in the latest sign of action in the property market, Morgan Stanley’s Arena Investment Management has informed shareholders it may pursue a float of a $337 million office fund. The company may also chase a sale if it feels that avenue will reap greater reward for shareholders.