DataRoom AM: Leviathan lunge

Woodside Petroleum is set to cough up a significant amount of cash for a stake in Israel's Leviathan gas field, while Royal Dutch Shell assesses two bids for its Australian assets.

The joint venture partners in the Leviathan gas field are reportedly on their way to Australia to sign a final deal with Woodside Petroleum. But just how much extra will the Australian firm pay to claim the 30 per cent slice it has long sought?

Elsewhere, Royal Dutch Shell receives strong final bids for its petrol retail and refining assets in Australia, the race for JPMorgan’s physical commodities division appears to be down to two, talk over the proposed merger between Myer Holdings and David Jones continues to simmer and the shake-up in the local dairy sector continues apace.

Woodside Petroleum

Woodside Petroleum is reportedly ready to put pen to paper on a deal to buy into the mammoth Leviathan gas field in Israel.

The Australian oil & gas group signed a memorandum of understanding in December 2012 to claim 30 per cent of the near-$10billion development for up to $US2.3 billion ($A2.63 billion).

Now it will offload $US3 billion for 30 per cent, according to Israeli news service Globes, matching the price indicated in this column a few weeks’ ago. It means that Woodside will be paying 30.4 per cent more in US dollar terms than originally slated, though that percentage rises when you compare the respective Australian dollar numbers.

Given the local unit has fallen significantly since the MOU deal, the price is around 55 per cent higher in Australian dollar terms.

The increase to the cost can be put down to a shoring up of a larger resource, the de-risking of the project through positive policy decisions in Israel and a reduced need for Woodside’s floating LNG expertise.

The Leviathan joint venture partners – Ratio Oil Exploration, Delek Group and Noble Energy – also signed their first customer this month ahead of production slated to begin in 2017. A final investment decision, however, is still eagerly awaited despite expectations one would come last year.

Senior representatives of Noble, Delek and Ratio reportedly flew to Australia over the weekend to sign a final deal this week. And given Noble is due to announce its latest earnings results on Friday morning Australian time, it is likely its executives will be keen to have the agreement wrapped up early in the week.

Royal Dutch Shell

Royal Dutch Shell has reportedly received two final bids for its downstream assets in Australia worth over $3 billion, according to the Australian Financial Review.

The offers are forthcoming from a group comprising Australia’s Macquarie Capital and Swiss-based Glencore Xstrata and a consortium involving oil trading behemoth Vitol and the Abu Dhabi Investment Council.

The report suggested the Vitol-led JV has the edge in the chase for Shell’s petrol retail and refining assets, though its plans to close the Geelong refinery are throwing a spanner in the works.

It is believed that Shell is hoping any buyer will pledge to keep the refinery open.

The oil giant, which has recently sold a stake in the Wheatstone LNG project in WA and stepped back from its Arrow gas JV, confirmed last week it was testing interest in its Australian retail and refining assets, though cautioned that a deal would only eventuate at the right price.

The company is also seen close to divesting its 23.1 per cent stake in Woodside Petroleum.

Macquarie Group, Blackstone Group, JPMorgan Chase, Mercuria

Macquarie Group’s rumoured move on the physical commodities division of JPMorgan Chase may have become a little easier, with one rival seen likely to exit the race.

Blackstone Group, which is reportedly one of three in the running for the $2 billion division, admitted physical commodities was a business it hadn’t quite wrapped its head around, leading to speculation it may no longer be a contender for the JPMorgan sale.

“We are trying to figure out - is there a strategy that is a winning strategy in commodities that is compatible with us and what we do well? I don't think we have got that figured out just yet," Blackstone president Tony James told reporters in words that don’t marry with an imminent multi-billion dollar purchase.

Assuming Blackstone is out of the running, Macquarie likely only has Swiss-based oil trader Mercuria to worry about.

A decision on the winning bidder is just days away, according to Reuters.

Murray Goulburn, Peter’s Ice Cream, United Dairy Power

United Dairy Power is believed to have sold out to Hong Kong interests in a deal worth around $70 million.

According to the AFR, the winning bidder is Hong Kong businessman William Hui, who is considered unlikely to significantly alter the Victorian-based dairy processor’s current operations. UDP was advised by Cashel House, while Hui turned to Rabobank and Rothschild.

It is the second notable dairy sale in Australia this year following the conclusion of the takeover race for Warrnambool Cheese and Butter, which saw Canada’s Saputo outpace Murray Goulburn and Bega Cheese. There are also rumours swirling around interest in WA-based Harvey Fresh as well as speculation that Peters Ice Cream may again be on the market.

The private equity owner of Peters, Pacific Equity Partners, is believed keen to cash out, with Murray Goulburn seen as a potential suitor. The business was bought by PEP from Nestle for around $250 million in 2012.

Myer Holdings, David Jones

The merger offer submitted to David Jones from rival Myer Holdings has sparked calls from major DJs investors for the retailer to engage. However, while David Jones has left the door ajar to a merger should Myer improve the terms of its offer, it appears unlikely anything will eventuate in the near-term.

The challenges of receiving regulatory approval and agreeing on price will be hard to overcome and any deal is further complicated by the fact both companies also need to find new chief executives. DJs is still hunting for Paul Zahra’s replacement, while Myer’s Bernie Brookes is due to step down in August.

Westfield Group, Westfield Retail Trust

In property, Intu Properties has confirmed it is in talks with Australia’s Westfield Group to purchase two British properties worth around $1.1 billion. The discussions revolve around Westfield’s stakes in the Derby shopping centre and the Merry Hill shopping centre.

Westfield has remained tight-lipped about its plans, though there are expectations some of the funds raised could go toward improving the terms of its split deal with Westfield Retail Trust shareholders.

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