DataRoom AM: Lowy tough talk

Frank Lowy has come out swinging after shareholders unravelled his plans for Westfield’s restructure, while Baosteel clears a hurdle in its Aquila takeover bid.

All eyes are on Westfield this morning, after a minority of Westfield Retail Trust shareholders brought the controlling Lowy family to its knees -- though nobody is claiming victory yet.

Elsewhere, Baosteel and Aurizon are one step closer to buying Aquila, Mantra finally prices its IPO, and is Wesfarmers looking at Optus?

Frank Lowy’s plan to carve up his Westfield empire may be in tatters, but the small group of investors who unravelled it won’t be celebrating.

Westfield Retail Trust deferred a shareholder vote on the restructure -- which would have merged WRT with Westfield Group, then separated the assets along geographic lines -- after proxy counting showed the proposal was unlikely to reach the 75 per cent approval required. Dissenting shareholders were primarily concerned about the level to which the Australasian parcel of assets would be leveraged. 

But what will worry them now is Lowy’s threat that Westfield Group would be willing to push on with the restructure without WRT, effectively transforming itself into a competitor and denying the smaller group about $100 million in fee revenue.

Whether Lowy’s tough talk can sway a second vote in his favour remains to be seen. Both sides have some serious thinking to do over the next 10 to 14 days.

There was better news at the Chinese offices of Boasteel, after Australia’s Foreign Investment Review Board cleared its joint $1.4 billion bid for Aquila Resources.

Baosteel launched the $3.40-a-share offer with Aurizon earlier this month with a view of pursuing co-investment opportunities. In particular, the pair wants to revive the stalled $10bn West Pilbara Iron Ore Project, in which Aquila owns a 50 per cent stake.

The deal is yet to be recommended by Aquila’s board and still needs approval from the target’s shareholders. With the stock trading around $3.52, investors still appear to be hoping for a bump in the bid.

In the hotel sector, Mantra Group has priced its long-awaited -- and oft-aborted -- initial public offering, seeking to sell 249.5 million shares at $1.80 each.

The $239.1m offering, underwritten by Macquarie and UBS, is priced at 12.7 times 2015 forecast earnings with a fully franked yield of 5.5 per cent -- in line with Mantra’s last failed raising attempt in March.

New shareholders are set to make up 53.2 per cent of the register, alongside CVC’s EV Holdings (26 per cent) UBS (17.3  per cent) and Mantra management (3.5 per cent).

Full details will be found in the prospectus, which is set to be lodged today.

Finally -- out of left field -- there is speculation Wesfarmers is considering taking on Telstra with a possible bid for Optus.

The rumours, reported in The Australian Financial Review, aren’t quite as farfetched as they may seem. The newspaper notes that Wesfarmers is already familiar with duopoly structures through its ownership of Coles, and, like food and liquor, telecommunications is a low-margin/high-volume business.

Wesfarmers is currently said to be shortlisted in the auction for Healthscope and also kicking the tyres at Orica, so big-ticket buys don’t seem to be a concern. But the success of any Optus deal would probably depend on whether the telco’s parent, SingTel, was willing to sell.

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