DataRoom AM: Shell's sell-off

Speculation mounts that Shell's Woodside stake will be next to go, while Air New Zealand's boss joins the Virgin board.

Royal Dutch Shell has made a $1.3 billion exit from some of its LNG interests in Western Australia. The Wheatstone stake sales to Kuwait Foreign Petroleum Exploration Company are a sign of the company’s push to get rid of non-core assets and more big moves in Australia can be expected as a result.

Elsewhere, Virgin Australia’s board draws another big name, Paladin Energy finally offloads part of its flagship mine, Wesfarmers Ltd makes a coal acquisition in Queensland, Telstra Corporation continues to strengthen its cloud computing capabilities and Seek Ltd tests the waters on the planned float of IDP Education.

Royal Dutch Shell, Woodside Petroleum, Goodman Group

It hasn’t taken long for new Royal Dutch Shell boss Ben van Beurden to make his imprint on the business. First he announced a major profit downgrade on Friday and then, last night, his company made a decision to exit some of its non-core assets in Australia.

The moves will see Kuwait Foreign Petroleum Exploration Company pay $US1.14 billion ($A1.3 billion) for Shell’s 8 per cent stake in the Wheatstone-Iago joint venture and its 6.4 per cent interest in the mammoth Wheatstone LNG project run by Chevron.

"Shell will remain a major player in Australia's energy industry," van Beurden insisted. "However, we are refocusing our investment to where we can add the most value with Shell's capital and technology."

Shell may claim Australia remains an important market for its operations, but the importance is clearly waning.

Next to go could be the company’s petrol refining and petrol retail outlets, with an auction for the $3 billion worth of assets reportedly nearing an end.

It may not stop there, with speculation growing that it could finally be ready to rid itself of the 23.5 per cent stake it maintains in Woodside Petroleum, which is worth around $7.5 billion. A block trade has long been expected since it sold a part of the shareholding a few years ago, though the company has largely remained tight-lipped about its plans.

If Shell is keen to offload non-core assets, the Woodside stake – a legacy of its failed attempt to buy the business – would be a logical divestment.

With Woodside’s stock doing little of late and the Australian dollar falling, Shell is seeing its US dollar value on the company drift lower. But van Beurden may be ready to put an end to that.

Meanwhile, another block trade is strongly tipped to be imminent, with China Investment Corporation ready to cash in its chips on Goodman Group, according to The Australian.

The entirety of CIC’s 9.8 per cent stake is reportedly up for grabs, with a sale likely to be worth around $800 million.

Macquarie Group is viewed as the frontrunner to lead the sale if it is given the green light.

Virgin Australia, Air New Zealand, Singapore Airlines, Etihad Airways

The Virgin Australia boardroom table is started to get crowded.

Following news yesterday that Etihad Airways boss James Hogan would personally take up an invitation to his company for a board seat, fellow major shareholder Air New Zealand has followed suit. According to the Australian Financial Review, the Auckland-based airline’s chief executive, Christopher Luxon, will join Hogan on the board, meaning there will be no shortage of ideas floating around the table.

All eyes are now on Virgin’s other major shareholder, Singapore Airlines, to see if it sends its boss, Goh Choon Phong, to the Virgin boardroom. Count in Virgin boss John Borghetti as well and the list of airline chief executives at a Virgin board meeting could tally four.

Too many chefs, perhaps?

Paladin Energy

Uranium producer Paladin Energy has finally made good on its long-held plans to offload a stake in its flagship Langer Heinrich mine in Namibia. The deal will see China Uranium Corporation Limited claim 25 per cent of the project for $US190 million ($A216 million).

Paladin had hoped to sell part of the development early last year but called off a sale in August. After receiving fresh offers from third parties, it soon restarted the sales process.

After initially jumping over 10 per cent on the news, the company’s stock faded in afternoon trade to close just 1 per cent higher. It seems that while investors were happy to see Paladin resolve some of its cash problems and sell the stake, they weren’t quite as pleased with the value of the deal.

Indeed, the value ascribed to the divestment wasn’t particularly exciting, though given the recent struggles of the once high-flying uranium miner and the broader pressures in the uranium sector, its bargaining power wasn’t strong. It does, at least, reduce the group’s heavy debt load.

The arrangement is likely to be tied up around mid-year after regulatory clearance is received.

O2 Networks, Telstra Corporation

Telstra Corporation has made no secret of its intentions to lift its focus on cloud computing, meaning yesterday’s around $60 million purchase of Melbourne-based network intergrator O2 Networks came as little surprise.

Telstra is flush with cash after completing the sale of its Hong Kong mobiles business and the partial divestment of its directories business, Sensis, in Australia. While a deal of such size is little more than a blip for a company with a cash pile of as much as $7-$8 billion, it is another step forward in its aggressive growth plans in the cloud-based network services sector.

O2 provides services to 370 business customers and has held a long-standing arrangement with Telstra. All staff at O2 are expected to be retained and the brand will be kept.

Wesfarmers, Peabody Energy

WA-based Wesfarmers Ltd has announced a $70 million coal purchase in Queensland.

The conglomerate, which is involved in the coal, retail and fertiliser sectors, made the deal for US-based Peabody Energy.

A 90 per cent stake in Mineral Development Licence 162 – in the Bowen Basin – was snapped up by the now Peabody-owned Macarthur Coal in 2010 for $334.5 million from Stanwell Corporation.

As a result, the recent history sums up the current weak state of the coal sector. Still, Wesfarmers is confident enough about the industry’s future to see some value in the development.

Seek Ltd

Seek Ltd is testing the level of interest for its planned float of education business IDP Education, which is jointly owned by Seek and Education Australia (which is backed by 38 universities).

A roadshow for the proposed $300-$450 million IPO has begun, with the group’s bankers travelling around Asia last week to drum up interest, according to the AFR. However, the company has still not yet told its advisers, Macquarie Capital and Goldman Sachs, to push ahead with a listing.

Seek announced the plans to list in late November.

We are still waiting for any major listings on the ASX in 2014, though there are signs that deals could be in the works in the next few months.

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