DataRoom AM: Saputo's bittersweet bait

Saputo’s ‘sweetened’ WCB bid could wind up at the Takeovers Panel, while Dexus is far from out of the race for CPA.

Saputo has made one last-ditch effort to get its takeover proposal for Warrnambool Cheese and Butter over the line before Christmas, but has it really sweetened its offer or just simplified it? Crucially, the company has yet to declare its latest offer ‘final’, meaning it realises there may still be a bit of action to play out in the long-running saga.

Elsewhere, GPT Group holds onto the front spot in the chase of Commonwealth Property Office Fund, Gina Rinehart scales back ambitious plans in the Galilee Basin and several big names pile into the new venture of former Jetstar chief executive Bruce Buchanan.

Saputo, Warrnambool Cheese and Butter, Bega Cheese, Murray Goulburn Co-operative

Saputo has made one final adjustment to its now unconditional offer for control of Warrnambool Cheese and Butter Factory Holdings as the ongoing saga rolls on toward Christmas.

The Canadian dairy giant has raised its offering to a clean $9.20 a share, but franking credits (worth up to 56 cents) have now been withdrawn, meaning the ‘raise to the offer’ is a cut for some, depending on circumstance.

The extra 20 cents to the $9-a-share offer is also only available to shareholders once Saputo gains 50.1 per cent acceptances, which appears unlikely given rival suitors Bega Cheese and Murray Goulburn Co-operative hold 36 per cent of stock and Kirin Holdings a further 10 per cent.

Saputo has long marketed its proposal as superior to the $9-or-so bids from Murray Goulburn and Bega because of franking credits worth 56 cents, and while the value has now been simplified, Bega and Murray Goulburn may take the case to the Takeovers Panel to examine the actions of WCB and Saputo.

Regardless of whether the Takeovers Panel gets involved, there is a slightly bitter aftertaste to the ‘sweetened’ offer, not helped by comments from Saputo chief executive Lino Saputo Jnr.

''Let's put things into perspective: we are coming into the holiday period, within five days people can have cash in the bank and enjoy the holidays,” he said, according to the Sydney Morning Herald.

One hopes it sounded better than it reads, because in print it betrays a tinge of arrogance. Yes, it’s a call to arms, but it sounds more like a wealthy man in a hurry talking down to his poorer cousins.

And it certainly doesn’t allude to the complexity of the decision for WCB shareholders, particularly for dairy farmers who are thinking long and hard about how this move will shape the future of their industry.

Any shareholder wanting to exit would be wise to do so via the stock market where they can receive $9.23 (as of yesterday’s close) rather than a conditional $9.20. This is another factor that will hurt Saputo’s acceptances, which currently amount to less than 1 per cent.

The $9.23 has the potential to go higher shortly given rumours Murray Goulburn will soon raise its bid. The Australian dairy co-operative is on the back foot given it is months away from receiving regulatory clearance, or otherwise, and needs to put in a higher bid to convince shareholders to wait around a while longer.

Importantly, Saputo didn’t go as far as to make its bid ‘final’, meaning it has reserved the right to alter its bid. It’s a sign the Canadian dairy giant is expecting another play from Murray Goulburn, and while it’s unlikely Murray Goulburn can raise its bid without Saputo firing back, it may at least assist in buying the Victorian dairy co-op a little more time.

While Saputo desperately wants this battle tied up before Christmas, such a scenario appears very unlikely present.

GPT Group, Commonwealth Property Office Fund, Dexus Property Group

GPT Group has retained the front seat in the fight for control of Commonwealth Property Office Fund (CPA) after Dexus Property Group and its partner Canada Pension Plan Investment Board opted not to match GPT’s bid in time. CPA cancelled an exclusive due diligence agreement with the Dexus consortium as a result.

Interestingly, both Dexus and GPT rose above the market’s gains yesterday, suggesting investors are pleased the takeover battle isn’t threatening to get out of hand with counterbids. After yesterday’s action, GPT’s bid remains around 4-cents-a-share higher than Dexus’ $1.21-a-share bid.

Dexus is far from out of the race to become Australia’s top office landlord however, with its 15 per cent stake in CPA still of significant value. Importantly, the group is pushing ahead with due diligence, just no longer on an exclusive basis.

In a statement, Dexus indicated it would still consider raising its bid, but would first wait for the dust to settle in the market given both offers are cash-and-scrip proposals.

"The consortium is of the view that, in the context of two proposals, each of which have a significant scrip component, it is too early to respond," Dexus said in a statement. "However, the consortium remains strongly committed to the proposal."

According to The Australian Financial Review, Dexus may look to leverage its plan to pay the Commonwealth Bank of Australia $41 million for the management rights to CPA. The Commonwealth was reportedly upset GPT didn’t offer a similar deal and it’s thought the bank may sell Dexus its 6 per cent stake in CPA as a result.

Aurizon, Hancock Prospecting, Gina Rinehart

Rail freight operator Aurizon has agreed to terms on building a 300 kilometre rail line with GVK Hancock for development of the Galilee Basin.

GVK Hancock, a combination of Indian conglomerate GVK and Gina Rinehart’s Hancock Prospecting, is planning to link several coal projects in the Galilee Basin with the Abbot Point coal port as part of a plan to ship a massive 60 million tonnes per annum of coal.

It has now agreed to terms with Aurizon on a more limited rail plan than expected thanks to softness in the coal market scaling back the grandest of plans. The original proposal was an exclusive 500km rail network, but instead GVK Hancock has opted for an open-access 300km network to reduce costs.

Still, the project is a mammoth one even if the more limited plan puts the development at a more modest $6 billion, compared to original expectations of around $10 billion.

Doubts remain about the project given the softness in the coal market and the sheer size of the development, though this deal represents a significant step forward.

The financial details of the rail deal were not disclosed.

Rokt, James Packer

Referral marketing group Rokt continues to gain traction, with a group of big names – including Lachlan Murdoch, James Packer and Seek co-founder Paul Bassat – bankrolling a push into America, according to The Australian.

The Australian digital marketing firm, run by former Jetstar boss Bruce Buchanan, has raised $8 million through the group of investors to help it pursue growth in the US. The deal values the one-year-old company at $50 million.

So far in Australia it has already convinced a number of big names to use its services, including eBay, Tigerair, Ticketek and Australia Post, and reportedly has 1 per cent of Australia’s digital advertising market. Now it wants 1 per cent of the global digital advertising market.

According to the report, the company expects to list on the ASX at some point, likely within five years.

Wrapping up

In the IPO market, Cover-More is pressing on with fast-tracked plans to list before Christmas, according to the AFR. The travel insurance group is looking to seal cornerstone investors for the $650 million float this week.

Elsewhere, Pact Group’s bookbuild is expected to be heavily oversubscribed ahead of a $650 million December 17 listing, while biotech Innate Immunotherapeutics is looking to raise $20 million in a float, the AFR reports.

In resources, Oil Search will find out in the next few weeks whether the PNG government has been able to raise $1.7 billion to maintain its almost 15 per cent stake in the ASX-listed group. If it fails, an Abu Dhabi-owned investment fund will claim ownership of the stake and Oil Search will become a likely takeover target. Oil and gas giants Exxon Mobil and Total SA are likely suitors.

Meanwhile, Sino Gas & Energy Holdings is hoping to raise $53 million through the issuance of new shares, according to The Wall Street Journal. The funds are to be used for CSG activities in China.

Finally, an IPO of Chrysler, one of the big three Detroit-based car companies, has been put off until next year after majority shareholder Fiat said a 2013 listing was not possible. Fiat is still hoping to come to an arrangement with unions to buy the 41.5 per cent of the company it doesn’t own and avoid a listing altogether.

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