DataRoom AM: Murray Goulburn use-by date

It’s looking more likely that Murray Goulburn will follow New Zealand giant Fonterra in raising equity outside the co-operative, but the plan to raise as much as $500 million is unlikely to help it gain control of Warrnambool Cheese and Butter. It may need to produce a new proposal in the next week or risk falling out of the race.

Meanwhile, the IPO market continues to heat up, talk of the GrainCorp takeover being foiled has investors rushing for the exit, private equity players mull a Mirabela Nickel play and a 20 per cent stake in Australand is offloaded by major shareholder CapitaLand amid rumours Stockland is lurking.

Warrnambool Cheese and Butter, Saputo, Bega Cheese, Murray Goulburn

Speculation is intensifying that Murray Goulburn Co-operative, Australia’s largest dairy exporter, will pursue a Fonterra-like partial float, but the timing may mean it offers little assistance to its plans to buy out Warrnambool Cheese and Butter Factory Holdings.

According to the Australian Financial Review, Murray Goulburn could look to raise as much as $500 million through the ASX avenue, though the plans may take six months to come to fruition. With fellow WCB suitors Bega Cheese and Saputo taking their bids unconditional, that is time MG doesn’t have.

The exact details of the raising are expected to be announced at the group’s AGM tomorrow.

The bigger issue for MG boss Gary Helou, however, is that his firm could soon be out of the running for control of WCB if it doesn’t raise its bid.

Yesterday, WCB advised shareholders that they would receive the $9 a share offered by preferred suitor Saputo five business days after the bid goes unconditional, which is expected to occur on November 28. The move was the latest push from the board for shareholders to go with the Canadian suitor.

That announcement, combined with Bega’s current local push to shareholders to accept its unconditional bid, means MG – which has not yet received regulatory approval – has precious little time left to convince WCB shareholders and its board of the merits of waiting.

The desire to wait may require a lift in the current MG offer to $10 a share, from the current $9 marker it has laid down.

Meanwhile, Fonterra Australia boss Judith Swales has quashed any lingering speculation the New Zealand dairy giant will make a play for Warrnambool Cheese and Butter.

"So as far as Warrnambool . . . there's opportunities to invest but it's not through bidding for Warrnambool,” she told The Australian.

Fonterra has been consistently linked to the WCB takeover, though its only entry into the fray was the purchase of a stake in WCB suitor Bega Cheese. And Swales maintains that stake was acquired purely to help protect its commercial arrangement with Bega.

The strength of the Bega share price suggests it is definitely a takeover target in the eyes of the market should it not gain control of WCB. Fonterra, Saputo and Murray Goulburn would be among the most interested parties.

Australand, CapitaLand

Singapore’s CapitaLand is the latest investor to capitalise on the strength of the market by following through with a block trade in developer Australand.

The $426 million sale of 20 per cent was carried out by Citigroup, with 115.66 million shares offloaded at between $3.685 and $3.75, a slight discount on average to Australand’s last closing price of $3.75, according to The Australian.

The move means CapitaLand retains 40 per cent in the ASX-listed property developer.

CapitaLand’s divestment was largely expected by the market after activity in the real estate sector, spurred by bids for the Commonwealth Property Office Fund, had seen Australand’s shares recently hit a 52-week high.

Given the success of recent block trades like Teck Resources’ offload of Fortescue Metals Group stock and CapitaLand’s lack of commitment to its Australand investment
(the company tried to exit earlier last year) a block trade was always on the cards.

However, a less than favourable trading update from Australand earlier this week made the task a little harder for Citi than it may have been just a week ago.

The big interest now is in who bought the stock, with Australand long rumoured as a takeover target, and Stockland’s name regularly appearing on the rumour mill also.

IPO market, Pact Group, Bis Industries, Redcape, GDI Property

Pact Group is considered likely to price at the lower end of its range as it gears up to list on the Australian Securities Exchange.

The Raphael Geminder-run packaging company could still end up being the largest float of the year however, with its December listing expected to raise around $650 million and value the company above $1.6 billion.

The company’s management is currently overseas trying to drum up interest in the float – a rare IPO on the ASX that isn’t being carried out for private equity interests.

Meanwhile, it appears Bis Industries owner Kohlberg Kravis Roberts could cut its stake to as low as 40 per cent through a $510 million listing of the logistical support services company.

The float is being managed by UBS, Goldman Sachs and Merrill Lynch and, according to The Australian, expectations on the valuation of the group have recently been lowered. It was originally thought the IPO could value the group at as much as $1.65 billion, though the report suggests this could now come in closer to $1.4 billion.

Elsewhere, the bookbuild for Hotel Property Investments, formerly Redcape Property Services, has seen pricing at the upper end of its range. The IPO is expected to raise just shy of $300 million.

It represents the latest sign of strong interest in ASX floats, though you can’t blame investors if they start to get a little fatigued during the manic month of floats ahead.

GrainCorp, Archer Daniels Midland

GrainCorp shares are continuing to tank, yesterday plumbing their lowest depths since a takeover proposal was first put forward by suitor Archer Daniels Midland a year ago.

Investors appear increasingly worried that Treasurer Joe Hockey will block the bid on ‘national interest’ grounds as the Nationals and other parliamentary players continue to exert their influence on the Coalition.

The latest resistance has come from four high-profile crossbench MPs: Clive Palmer, Bob Katter, Adam Bandt and Andrew Wilkie, with the unlikely alliance introducing a private members bill to stop the takeover.

It is now just four weeks until Hockey has to make a decision and we can expect plenty of movement in the GrainCorp share price in the meantime.

Mirabela Nickel

Former market darling Mirabela Nickel continues to cling to life as an ASX-listed company, as negotiations with creditors continue following last week’s standstill agreement.

According to the Australian Financial Review, private equity firms are circling, with Resource Capital Funds the frontrunner to get involved. Kohlberg Kravis Roberts may also be interested, but rescue negotiations are reportedly in their early stages.

The group had its debt rating cut to D by Standard & Poor’s earlier this week in the latest blow and its securities have been suspended since October 9, which was soon after the nickel miner announced it had lost one of its two customers.

S&P believes the company will run out of cash early next year, meaning negotiations will need to start progressing very soon.

Wrapping up

Japanese brewer Asahi, which paid $1.2 billion for the Independent Liquor business in Australia two years ago, is planning bolt-on local acquisitions in the next 12 months in the craft beer or cider category, according to The Australian. The group’s local boss, Greg Ellery, told the paper the company had the capacity for one or two purchases in the coming year to help lift production at its Melbourne brewery.

Meanwhile Leighton Holdings subsidiary Thiess announced yesterday it had secured a $550 million enhancement to its $2.3 billion contract at the Lake Vermont coal mine in Queensland. The group will offer engineering and operations assistance to help the mine increase production from six million to eight million tonnes a year.