DataRoom AM: Phone it in

TPG looks a likely suitor for AAPT, while investors bet the WCB bidding war has a long way to go.

Telecom New Zealand appears finally ready to rid itself of the pain of its AAPT purchase from a decade ago, with TPG seen as a likely buyer. Then again, we’ve been here before and learnt it ain’t over until a certain someone sings. Meanwhile, dairy jostling has investors in a froth, Rio Tinto teams with IBM, BHP Billiton opts out of the Indian oil and gas sector and Anchorage wants National Australia Bank to offload some distressed agricultural loans.

Telecom NZ, AAPT, TPG, Vodafone Australia

Telecom New Zealand is keen to finally put the agony of its $2 billion AAPT purchase behind it, placing the telecommunications group on the auction block again, various media reports suggest.

According to The AustralianTPG is interested in the business, with a price tag of $400 million being shopped around. Indeed, it’s a case of déjà vu as it was only three years ago that TPG reportedly came very close to buying AAPT for a similar amount.

According to reports back then, TPG offered $440 million to AAPT to outbid fellow suitors OptusQuadrangle Group and Pacnet, the latter of which offered $420 million in 2008.

Beyond TPG, The Australian believes Vodafone Australia could be interested, largely due to the fibre-optic cable network it would acquire through the deal. If Vodafone made a move it may have to buy back a percentage of its own business, with The Australian Financial Review suggesting Telecom NZ will also try to offload its 10 per cent stake in Hutchison Telecommunications Australia, which owns half of Vodafone Australia.

Telecom NZ purchased AAPT – founded in the early 90s as the telecommunications division of Australian Associated Press – around the turn of the century. It has since spent considerable funds beyond the $2 billion purchase price to invigorate the former clear number three telco. Its latest major attempt was a $357 million buyout of Powertel in 2007.

In and around this time it has repeatedly been close to a sale, if reports are to be believed, but has so far been unable to secure anything at the price it has sought.

The latest development was an announcement in August that Telecom NZ had put the Australian division up for review over the coming financial year.

“By the end of FY14 we expect to have a clear strategic pathway for our Australian business,” the group said at the time.

If AAPT is sold, that pathway would be pretty clear.

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

The share price movements of dairy groups Bega Cheese and Warrnambool Cheese and Butter told an interesting tale yesterday.

WCB, the subject of the affections of three suitors, climbed as much as 5 per cent before closing almost 3 per cent higher. Its closing price leaves it 8 per cent above the lead offer of $7.50 a share from Murray Goulburn. In other words, investors believe the bidding battle has the legs to go a long way from here.

The other bidders, Bega Cheese and Saputo, are considered likely to revise their offers in the coming fortnight, while NZ giant Fonterra is reportedly keeping a watching brief.

The WCB share price isn’t the only one worth watching however, with Bega’s rising as much as 8 per cent during yesterday’s trade before finishing the day 5 per cent higher. It is rare to see a suitor’s share price rising while it is in a takeover battle, but there are unusual circumstances in this case.

For a start, most investors think Bega, the smallest of the contenders, has little chance of getting a deal done. Secondly, Bega has an 18 per cent stake in WCB, which means it is in for a financial windfall when a sale eventually goes through. Finally, the buzz around WCB highlights the interest that should one day come for Bega.

After WCB falls, Bega will be the only Australian dairy group listed on the ASX and a sitting shot for a takeover in the next year or two.

Rio Tinto, IBM, BHP Billiton

Mining heavyweight Rio Tinto has agreed to an outsourcing deal with IBM that could result in the loss of hundreds of jobs, according to the AFR.

The contracts could last as long as a decade, with IBM expected to net around $100 million for taking over some back-office IT and accounting jobs.

Meanwhile, Rio competitor BHP Billiton has all but exited the oil and gas sector in India, retreating from nine of its ten exploration blocks. Local media suggest clearance delays are at the heart of the move.

NAB, Anchorage Capital Group

National Australia Bank is being urged to bundle dozens of cases of distressed agricultural debt by hedge fund Anchorage Capital Group, according to The Australian.

If done, the package would hold around half a billion dollar’s worth of loans, though NAB is reportedly non-committal despite ongoing discussions.

The largest commitment to be included in the portfolio would be an $80 million loan to a beef farm, The Australian said, with NAB reportedly assessing the best bundling to boost buyer interest and reap the greatest return.

The challenges in the sector have been intense since the big drought of the late nineties, leaving many farms struggling to stay afloat.

Wrapping up

UBS and Morgan Stanley will be the lead managers on Quadrant Private Equity’s $450 million float of Burson Auto Parts, according to the AFR, with the listing planned for the first quarter of 2014. Elsewhere in the IPO market, KKR’s BIS Industries may now float in December rather than next year, while the Dick Smith listing could go the other way and be pushed back until 2014, the AFR believes.

In healthcare, Ramsay Health Care is toying with another acquisition in France. The ASX-listed group said it was in exclusive discussions with the owner of Medipsy, which has the largest number of psychiatric clinics in the European country.

In resources, Cockatoo Coal has reportedly lined up funds for a coal mine expansion. The group’s shares entered a suspension yesterday pending an announcement of a “material capital raising”.

Meanwhile, Minotaur Exploration will compulsorily acquire the remaining 9 per cent of Breakaway Resources shares it does not own after the junior cleared the 90 per cent acceptances mark.

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