DataRoom AM: Warrnambool wildcard

Politicians will soon be throwing their weight around in the complicated takeover of Warrnambool Cheese & Butter, while Woodside Petroleum readies its checkbook for the Israeli gas deal.

The heated stoush for control of Warrnambool Cheese & Butter remains on a knife-edge, with Bega Cheese likely to decide the ultimate victor. But will politics intervene?

Elsewhere, Woodside Petroleum may finally be ready to bite the bullet on a multi-billion dollar deal in Israel, Shell Australia is rumoured to be closing in on a sale of its local petrol retail outlets and the Australia Post privatisation debate rages on.

Warrnambool Cheese & Butter, Murray Goulburn, Saputo

The board of Warrnambool Cheese & Butter reaffirmed its opposition to the $9.50 takeover offer put forward by Murray Goulburn, but the suitor remains determined to get its target.

Murray yesterday outlined a willingness to go on-market to lift its stake by around 2 per cent while again imploring WCB shareholders to hold off until the outcome of its application for regulatory approval was clear.

"Murray Goulburn is entitled to acquire WCB shares on market, up to an ownership level of 19.9 per cent at prices up to $9.50 cash per WCB share, and reserves the right to do so without further notice," the company said in a statement.

The dairy co-op is currently seeking regulatory approval through the avenue of the Australian Competition Tribunal, which will likely run until the end of February.

And like all complicated takeover tales, politicians are about to get involved.

According to The Australian, a hearing of the tribunal in the Federal Court yesterday saw the judge request input from state and federal governments.

Few politicians have sought to involve themselves in the long running battle so far, but expect several to come out in favour of Murray Goulburn given its promise of a national dairy champion to rival New Zealand’s Fonterra.

For the rural MPs and Nationals Party, which created the pressure to block a takeover of Australian grain handling leader GrainCorp, the notion of a local dairy leader would be appealing at the expense of a takeover of agricultural assets by Canadian dairy giant Saputo.

It should be noted, however, the call for government comment is no more than a request.

Murray Goulburn is fighting an uphill battle given previous concerns flagged by the Australian Competition and Consumer Commission when Murray was blocked from buying WCB a few years ago.

Just before Christmas the ACCC provided its input to the tribunal with little fanfare, which raised several doubts without giving a definitive view on the deal. The competition watchdog also put forward a request for any authorisation to be given over a period of time.

“Since market conditions, market structure and other relevant facts and competitive dynamics can change over time, the ACCC considers that it is appropriate for any authorisation to be granted for a specified time period, and that 12 months is likely to be an appropriate period,” the ACCC advised the tribunal.

Meanwhile, Bega Cheese remains the wildcard in the proceedings, with its near 19 per cent stake crucial to any party wanting to reach the 50 per cent mark. According to The Australian, Bega is looking to shop its stake to the highest bidder – which right now is Murray Goulburn, albeit with a more conditional offer.

Indeed, it appears that if you want Warrnambool, you ‘better buy(out) Bega’.

Bega was the first suitor for WCB in the long running takeover battle, but now it has dropped out of the race, it is considered a good bet to turn from predator to prey in the next year or two as consolidation of the Australian dairy sector gathers pace.

Woodside Petroleum

As Woodside Petroleum continues to weigh an option to buy into the huge Leviathan gas field, the partners in the Israeli project are moving forward.

The latest development was the signing of a $1.2 billion, 20-year deal with the Palestine Power Generation Company (PPGC) – the first export contract for the offshore gas field.

Meanwhile, Woodside, which in December 2012 signed a memorandum of understanding to buy a 30 per cent stake in Leviathan at up to $US2.3 billion, is reportedly close to putting pen to paper on a firm deal.

According to Israeli news service Globes, Woodside could sign on the dotted line within days but on less favourable terms than it agreed through the MOU. The report suggested the Australian giant would be willing to accept a 25 per cent stake for more than what it was willing to pay for 30 per cent.

It is likely that the group will end up offering a conditional $US2.5 billion to $US3 billion for the rights to 25 per cent of a project likely to cost upwards of $8 billion to develop.

Deals such as the one announced yesterday with PPGC help to de-risk the project and positive developments on Israel’s gas export policy in recent months as well as increased reserves at the project have boosted Woodside’s confidence in getting a strong return on any funds it sends the way of Leviathan.

There is, however, still no agreed timeline for development, with 2017 the most likely start date for production.

Shell Australia

A $3 billion sale of Shell Australia’s petrol refining and retail business is imminent, according to The Australian Financial Review.

The paper reports that the auction of its local assets is in the final stages with a consortium including Macquarie Group battling rival bids from private equity group TPG and Thai energy firm PTT.

Shell’s local retail partner, supermarket chain Coles, will be keeping a close eye on proceedings, though would not be a logical bidder due to the likely backlash from the ACCC.

Australia Post

The debate around the possible privatisation of Australia Post can be expected to drag on all year, with it likely to flare upon the release of the federal budget, the National Commission of Audit and competition policy review.

It did, of course, get a head start this week when comments from ACCC boss Rod Sims were taken a little out of context. Regardless, it has spurred a debate that will be hard to stop with the entries of former Australia Post chairman David Mortimer and former ACCC boss Graeme Samuel further stimulating the discussion.

According to the AFR, both Mortimer – who served as Australia Post chair for six years – and Samuel believe a privatisation would be a wise move, with the latter claiming arguments against it “just don’t stack up”.

SG Fleet, Champ Ventures

Champ Ventures has confirmed that it will seek to pursue an IPO of its 42 per cent stake in fleet management company SG Fleet. The private equity firm is looking to make a significant profit on its 2011 investment with a float worth as much as $500 million likely to go through before the end of the first quarter of the calendar year.

As we reported in this column yesterday, majority shareholder Super Group will retain its full shareholding.

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