DataRoom AM: Linc lost

As Linc Energy prepares to buy a shuttered Rio Tinto coal mine, the company has shocked the market with a decision to abandon the ASX in preference for a listing in Singapore. It’s bold, but is it wise? Elsewhere, another ANZ play for a Hong Kong bank appears set to come to nothing, Westpac remains in front in the pursuit for Lloyds’ Australian assets and the Warrnambool Cheese and Butter board gets a boost in its attempts to shun suitor Bega.

Linc Energy, Rio Tinto

Linc Energy appears done with the Australian sharemarket, yesterday announcing plans to delist from the ASX and float on the Singapore Exchange instead. Before then it will be acquiring coal mining assets in Queensland.

Officially those assets won’t be revealed until a trading halt is lifted either today or tomorrow, but various media reports have spotlighted Rio Tinto’s Blair Athol as the asset in question. The 30-year-old mine has been closed since November as Rio hunted for a buyer though could be brought back online within two months, according to the Wall Street Journal. The likely value of the deal is not known.

The news is a bit of a surprise given Linc has shown a desire to sell coal tenements rather than buy. Perhaps a bigger shock, however, is the move to Singapore to “improve access to capital markets and reposition the business to deliver its long-term growth strategy”.

“As Asian economies continue to grow, demand for energy is expected to increase faster than anywhere else in the world and gas is destined to fulfill an increasing proportion of the region’s energy needs,” chief executive Peter Bond said.

“Listing on the SGX will improve our access to international capital markets and enable us to exploit this opportunity.”

It is a bold shift and one that on the surface makes little sense given the ASX is much bigger than the Singapore Exchange. Also, Asian investors are very comfortable with Australian stocks and given the firm’s headquarters are actually going to stay in Brisbane, the decision is a little baffling.

According to the Australian Financial Review, the reasoning behind the step is largely Bond’s belief the company is undervalued in Australia for being diversified and he thinks its true worth is around $6 to $8 a share. The report also indicated Bond would consider breaking up the company’s assets to further reap value, though there is nothing stopping him doing that here. Linc, which at one point in 2008 crossed the $5 mark, now trades at $1.26 meaning if Bond is correct, it is well short of its real value.

Investors weren’t particularly excited by the news yesterday, sending the company’s stock down 10 per cent before a trading halt was put in place pending the coal announcement.

A shareholder vote on the delisting proposal will be carried out on November 6 during an Extraordinary General Meeting.

ANZ Bank, Lloyds, Westpac, Macquarie Bank, Pepper Home Loans

ANZ Bank is likely to withdraw from the race for Hong Kong’s Wing Hang Bank, according to the AFR. ANZ, which has a focus on Asian expansion, apparently sees the asking price as being too high, but may reconsider should a lower price be put on the table.

Chairman John Morschel declined to comment on the speculation yesterday, but if true it would be the second time ANZ has failed to catch a Hong Kong-based target after baulking at the asking price for Wing Lung back in 2008.

Another Hong Kong bank, Chong Hing, is also reportedly on the chopping block, but there is no indication that ANZ has any interest at this stage.

Meanwhile, UK’s Lloyds has received three final bids for its Australian business with Westpac still largely viewed as the favourite to wrest control of the troubled division. The other contenders are Macquarie Bank and a consortium led by Pepper Home Loans. When a decision will be made is up in the air, with a report in the Financial Times indicating exclusive talks with one bidder will begin by the end of the month while the AFR expects a resolution by early next week.

Warrnambool Cheese and Butter, Bega

If you’re going to repel a suitor’s advances it’s always best to have some strong numbers you can present to shareholders, and Warrnambool Cheese and Butter has just that. A healthy earnings forecast has offered the dairy company’s board another opportunity to denigrate Bega’s takeover proposal as “highly opportunistic”. The company is expecting earnings before interest, tax, depreciation and amortisation of $47 to $52 million in the current financial year, as opposed to $25.5 million for the 2012-13 financial year.

The problem for WCB boss David Lloyd and the board is that the share price remains 2 per cent below the implied offer price of around $6.32, which means a) traders don’t expect a rival offer nor a larger bid from Bega and b) shareholders may get restless. The latter is the worry moving forward, and WCB would want to hit those forecasts next year should the Bega approach be fended off. If it doesn’t, it risks a backlash from investors.

UBS Australia

UBS Australia may be looking to offload all, or part, of its wealth management arm. Two proposals allegedly put forward include a full sale, possibly to Bell Potter Securities, or the retention of the top 20 per cent of advisers and a divestment of the rest of the division.

The Australian wealth management arm of UBS has faced a challenging year with an exodus of a number of advisors. The departures are largely related to the exit of Pep Perry last year who then started up advisory firm Escala Partners and had a number of former colleagues join him.

Wrapping up

In IPO news, 45 per cent of the stock in Meridian Energy has been offloaded to New Zealand investors at the upper end of the range for the IPO in a sign of strong demand. Fellow IPO candidate McAleese is set for its own test of demand, with the AFR reporting a $155 million book build will take place toward the end of next week.

Meanwhile, another possible float, that of Dick Smith Electronics, is now more likely to occur next year after the turnaround story has been given more time to prove its worth, according to the AFR.

Finally, South Australian-based seafood group Clean Seas Tuna has told shareholders it will launch a capital raising in the next few days. The company’s stock, which has enjoyed a good run of late, is the subject of a trading halt pending the release of further details.