DataRoom AM: Woolies' mammoth play

Not content with the challenge of tackling the hardware sector, grocery giant Woolworths is pursuing a major offshore expansion through a bid for Hong Kong retailer ParkNShop. Meanwhile, mining behemoth BHP is refocusing on core assets and the latest rumours suggest a nickel spin-off could be imminent. Elsewhere, another IPO sets the market alight, Perpetual moves closer to Trust and CSL continues to reap value for its shareholders.

Woolworths

Australian supermarket leader Woolworths is still looking to branch out to Asia despite its troubled foray to India. The company has long been linked to an offer for Hong Kong’s ParkNShop and, according to The Australian Financial Review, is tabling a final bid upwards of $US3 billion.

If true, it’s a bold play for the retailer given its troubles with expansion through the hardware sector back home. It also has the lingering memories of a failed Indian joint venture, an increasingly competitive Coles to counter and shareholders reticent to take offshore risks.

Back in June chief executive Grant O’Brien noted that some significant owners of stock in the company were nervous about attempts to tap into the rise of Asia through acquisitions.

"But it's not going to stop us from doing anything, we just know that we'll have to be able to tell a great story, and that's a good thing in making sure we do our homework on it,” he said.

"Permission to do this has to be earned very carefully . . . there have been some high-profile failures by Australian companies overseas, and that's held up as showing that companies have to be careful about stepping off our island continent into markets that are unfamiliar to us.”

ParkNShop is one of the dominant two supermarket chains in Hong Kong with 286 stores and is owned by Asia’s richest man Li Ka-Shing. It was put on the market earlier this year with four suitors reportedly running their eye over the business in recent months.

This list was cut to just two last week, according to The Standard, with Woolworths likely to face off against just Thailand’s Chareon Pokphand Group, which is bidding with the help of US private equity group Carlyle.

The HK paper said other bidders had been scared off by the asking price, which it believes could be in the order of $HK30 billion (~$A4 billion).

BHP Billiton

Rumours are surfacing that BHP Billiton could again put its nickel assets up for sale. The world’s biggest miner floated such a plan prior to the departure of former chief executive Marius Kloppers, but abandoned the sale earlier in the year, according to several reports.

According to the AFR, market watchers believe the assets will soon be up for grabs again, with the group recently writing down the Nickel West asset and leaving the metal out of its four pillar strategy.

At one point in February, the miner was reportedly chasing a spin-off of the nickel division on the ASX worth around $4 billion. If it is still considering such a move, now could be a good time with investors thirsty for any new offerings on the ASX. The one problem for BHP though, is the current weak perception of the nickel sector. Nickel prices have been hovering near four-year lows and remain well below where they started the year.

The turmoil on nickel markets has led Mirabela Nickel – one of the best known nickel companies on the ASX – dangerously close to bankruptcy, while stock in the biggest player in the sector – Western Areas – is 70 per cent off where it started the year and less than half where it was just two years ago.

As such, BHP would be confronting two conflicting forces should it divest: a hot general market and a cold nickel sector.

According to the AFR, BHP might pursue a private sale, with Jinchuan Group and First Quantum Minerals among likely suitors.

Perpetual, Trust Company, IOOF, Equity Trustees

ASIC has registered the scheme booklet relating to Perpetual’s takeover of Trust Company, the latest step in what seems an inevitable acquisition for Perpetual.

A shareholder vote on the proposal has now been set down for November 28 and a convincing show of support is likely given the deal has the backing of Trust Co’s board. Should the deal be approved, implementation is anticipated before Christmas.

The greatest barrier to a takeover was in fact cleared last month, when the competition watchdog approved the deal. While the ACCC flagged concerns, it eventually gave it the tick provided Trust’s 13.4 per cent stake in competitor Equity Trustees was offloaded.

The assumed positive vote in November will end a three-way fight for control that started with a bold bid from Equity Trustees in June. That deal was always going to struggle due to the suitor’s size and it was only a matter of time until a bigger rival came along to challenge. First, Perpetual lobbed a bid, before IOOF Holdings tried its luck. Finally, a counter-bid from Perpetual won the day.

Ironically, the Trust stake in Equity Trustees will be assumed by IOOF, which many expect to make a bid for full control in time. Everybody’s a winner it seems.

IPO market, Sealink, OxForex

Another IPO has been well received on the ASX, with Sealink adding 36 per cent on its first day of trading. The travel group closed the day at $1.50, well above the $1.10 listing price, in a result that bettered the hopes of management.

"I couldn't be happier," chief executive Jeff Ellison said, according to The Australian. "It's terrific to see the support for the company. We ran a sweep (on the opening price) and no-one got near that number at all.''

It just goes to show that gambling on the sharemarket is never easy.

The company raised $16.5 million through the offering of 15 million shares.

The development follows the sensational debut of OzForex on markets last week, which has continued to rise in recent days and now rests over 40 per cent higher than its listing price. More significant tests are ahead with Meridian Energy, Nine Entertainment and Dick Smith Electronics among the biggest names likely to list before the end of 2013.

Warrnambool Cheese and Butter, Bega, Saputo

The Warrnambool Cheese and Butter board has implored its shareholders to dismiss the Bega offer and ignore any documentation sent to it by the rival dairy firm. It retains the view that the Saputo offer is better value and it is hard to argue with that as it stands. Currently the Canadian dairy group’s offer is higher in terms of value and offers greater security as it is all cash as opposed to cash and scrip.

Bega, however, may not be done with just yet, currently weighing up its options for a revised offer.

CSL

Blood plasma group CSL has been given the green light from shareholders to pursue a $950 million share buyback, continuing its focus on using profits to reduce its shares on offer. Before the latest move the company had already bought back 22 per cent of its stock in the last eight years.

It is a remarkable feat, especially given the GFC saw most companies chase dilutive equity raisings.

Wrapping up

The economic modelling team of Mercer will shift to PwC Australia with the former seeing little sense in maintaining the division, according to the AFR. It is unclear, however, whether PwC acquired the business or merely took over the employment contracts of its employees.

In retail, Oroton Group is pursuing a deal with US-based Gap Inc “to develop the Gap brand in Australia and New Zealand and certain Pacific Islands.” A deal appears close, but for now Oroton has executed a non-binding heads of agreement with Gap’s current Australian franchisee to purchase certain inventory and assume control of the Gap stores operating from Westfield Sydney, Chadstone shopping centre and Melbourne Central from next month.

In property, FKP Property Group has sold a 50 per cent interest in a 309 apartment project in Brisbane to PBD Developments for $28 million along with a 14-hectare site in Point Cook, Victoria for $18 million. The latter is part of FKP’s Saltwater Coast residential estate. Both sales were made above book value.

Finally, the most closely watched IPO of the year – Twitter – is edging closer to its listing date. The social network group has chosen the New York Stock Exchange ahead of the tech heavy Nasdaq, where the likes of Apple, Facebook and Google can be found. It is set to go public on November 15.