LUNCH DEALS: Virgins and Holdens
Virgin Blue and Australand announce plans to tap the market, while the drums keep beating for Holden's sale.
Skipped BREAKFAST DEALS this morning? Catch up on the most important deal of the day.
Virgin Blue and Australand announce capital raisings, supported respectively by key stakeholders Virgin Group and CapitaLand of Singapore. Meanwhile, changes in the global car industry keep the drums beating for a sale of Holden and further developments in increasingly dramatic China's steel sector make for interesting reading. Plus news on Murchison Metals, SingTel and more.
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Virgin Blue Holdings
Following rumours over several weeks, Virgin Blue Holdings has announced a capital raising, but at $231.4 million, the amount being raised is far less than the $400 million figure originally speculated. The fully-underwritten offer has been supported by Richard Branson's Virgin Group, as opposed to any other third party airline as cornerstone investor. No mention was made of any of these speculated parties, which include Singapore Airlines, Air New Zealand and Emirates, but Virgin Blue did say that its planned joint venture with Delta Air Lines would ensure it was well placed in the event of a market recovery. The London-based Virgin Group will be placing between $61 million and $79.9 million, subscribing for 304.9 million shares and acting as a sub-underwriter for 20 per cent of the retail component of the entitlement offer. Credit Suisse and JPMorgan have picked up the underwriting mandate for a 2.7 per cent underwriting fee and a 0.3 per cent management and arranging fee. The equity raising comprises an institutional placement to raise $21 million and a 1-for-1 renounceable pro-rata entitlement offer to raise about $210.4 million. Both components are priced at 20 cents per share, a steep 31 per cent discount to Virgin Blue's last traded price of 29 cents.
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Australand Property Group
The Australian arm of Singaporean real estate group CapitaLand, Australand Property Group, has also announced a much-mooted capital raising. Priced at a 20 per cent discount to last trade, Australand's 7-for-10 entitlement offer is fully underwritten by JPMorgan and UBS to raise $475 million. Both the retail and institutional components of the raising will yield the underwriters a 0.5 per cent management fee plus a 2.5 per cent underwriting fee excluding the proceeds raised from CapitaLand. The Singaporean group owns 59 per cent of Australand and has committed to take up its full pro-rata entitlement of approximately $282 million. Australand says the raising is an integral part of its overall capital management program, which also comprises of non-core asset sales, debt refinancing and cash flow retention. Property trusts across the board have been engaged in similar initiatives since the advent of the credit crunch. Industry observers expect the raising to be followed by another secondary offer from Goodman Group in the next couple of weeks. Various sources expect that offer to be in the region of $1 billion to $1.5 billion.
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Deals on wheels – Australia
Following Robert Gottliebsen's yarning with his car dealer friends, reported this morning, anecdotal evidence does seem to suggest that car sale volumes in Australia have slumped this month. Such a situation could give impetus for the never-ending speculation that Holden, currently owned by General Motors, could be sold to a Chinese automaker, specifically Dongfeng Motor Corporation. Holden is one of General Motors' best divisions, but despite the insistence of local management and the Australian government, it never gets mentioned as a "core” brands like Chevrolet, Cadillac, Buick and GMC. Holden, for better or worse, is about as core as Hummer, Saab and Saturn, three marques already sold off. And if Australia's auto market goes into a post-stimulus slump just as the United States government introduces its $US1 billion 'cash for clunkers' program, then the pressure to get out of Holden should only increase.
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Deals on wheels – overseas
The automotive M&A market is at least showing signs of great liquidity and added to the revelation by a Dongfeng Motor Corporation executive that the firm was interested in Holden it is increasingly hard to not see the car-maker being sold. Just last week Sinotruk, China's biggest heavy-truck manufacturer, sold a 25 per cent stake of itself to Germany's MAN for €560 million, a deal that will give it a presence in Europe, perhaps paving the way for further acquisitions like the truck division of Sweden's Volvo. Italy's Fiat meanwhile received European Union approval to purchase Chrysler out of bankruptcy on Friday. Fiat already has a 20 per cent stake in the struggling American icon. As for General Motors' sale of its Opel division in Germany, however, Beijing Automotive is officially out of the bidding, following a breakdown in negotiations over intellectual property. Opel is now set to be sold to either RHJ International, a Belgian private equity group, or Magna International, an Austro-Canadian parts manufacturer with financial backing from Russia's Sberbank. And China isn't the only emerging powerhouse with a hunger for Western vehicle technology and brands. The entity that manufactures Fiat cars in India has raised approximately $US510 million in rupee and euro-denominated bonds arranged by Citigroup. The International Finance Corporation has also just recently helped Volkswagen's Indian manufacturer raise a €135 million loan with the assistance of BNP Paribas, Singapore's DBS, Bank of Tokyo-Mitsubishi and Socit Gnrale. And speaking of Volkswagen, the epic battle for control of Porsche is now finally over with VW purchasing the German sports carmaker. The takeover sees Porsche chief executive Wendelin Wiedeking step aside with a cool €50 million pay-off. That's enough for over 430 Porsche 911 Carreras. And with a quantity like that you'd probably get a discount.
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Steel yourself – riots
Following reports out of Hong Kong that a Chinese steel company manager had been killed in rioting over a merger deal and executive pay (see Breakfast Deals: From Rio to riots), the Financial Times has reported that the merger at the centre of the incident has been postponed. After Chen Guojun was beaten to death amid a 30,000-strong riot in the north-eastern Chinese city of Tonghua, a merger between the privately-held Jianlong Group and state-owned Tonghua Iron & Steel is off. China has laid-off approximately 50 million workers since privatisation and corporatisation of its traditional state-run companies began in the 1990s. Firms like Tonghua, which employed Maoist-style management principles (or should we say Stalinist, considering the man's name association with steel), have been on the decline for some time and as China tries to make its strategic steel industry stronger in the face of trade wars with the likes of Rio Tinto further privatisations and corporatisations can be expected. The owner of Jianlong, Zhang Zhixiang, is thought to be one of the richest men in China.
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Steel yourself – Colin Barnett
No Stalinist man of steel is Western Australian premier Colin Barnett, but his support for firms like Beijing-based Sinosteel Corporation is nevertheless, er, steely in the face of economic nationalism and misgivings about the role of Chinese companies in Australia. Barnett was quoted in today's Australian Financial Review saying that he would back a new bid by Sinosteel for Mid-West iron ore company Murchison Metals. Sinosteel already owns 5 per cent of Murchison and last year beat it to a takeover for neighbouring company Midwest Corporation. Barnett said the old circumstances that prevented Sinosteel from accumulating more than 49.9 per cent of Murchison had changed and that development of the company's Oakajee port warranted a more liberal foreign investment regime. Murchison is working with Mitsubishi on the $700 million Oakajee Port and Rail project. A number of Chinese companies are set to build key elements of Oakajee on a contractor basis. The West Australian newspaper has meanwhile reported that Barnett and Anshan Iron & Steel Group (Ansteel) chief Zhang Xiao Gang have signed a heads of agreement to investigate the building of Western Australia's first steel mill at Oakajee through a joint venture between Ansteel and Gindalbie Metals.
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Singapore Telecommunications
Optus parent Singapore Telecommunications could raise $US3 billion to finance its participation in a merger between its 31 per cent Indian unit Bharti Airtel and South Africa's MTN Group, according to Reuters Basis Point. Goldman Sachs is said to be advising SingTel on the financing plans and its response to the proposed $US61 billion Bharti-MTN merger. Talks are expected to continue for another few weeks, sources told the financial news provider. Last week chief executive Chua Sock Koong told shareholders at the company's AGM that SingTel also continued to look at investment opportunities in China. SingTel already has stakes in Indonesia's PT Telkomsel, Thailand's Advanced Info Service, the Philippines' Globe Telecom, Pakistan's Warid Telecom and Pacific Bangladesh Telecom as well as India's Bharti and Australia's Optus.
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Wrapping up
As American supermarket giant Costco makes an application to invest at least $120 million in New South Wales outlets, the bankers Woolworths has engaged at Citigroup will no doubt be spending later nights finding avenues for the retailer to grow its business in the face mounting competition in the Australian market. Amid margin-slashing fuel discount price wars and frequent flyer point scoring, Woolies is said to be eager to enter fresh new markets such as hardware in Australia and supermarkets in the United States. Another option could be the ethnic food sector, however, if Canada's leading grocery chain Loblaw Company is any example to emulate. Loblaw announced on Friday that it had made a $US225 million bid for Asian food-store group T&T Supermarket, which has 17 outlets across British Columbia, Ontario and Alberta. Australia's Asian grocery sector is dominated by mum-and-dad operators, but like Canada, the taste for Asian foods here is growing as immigration and cultural trends continue. An expansion in the sector could prove to be very tasty for Woolworths shareholders. And finally, remember last week's story about the fake takeover offer scam used by a fraudulent bidder to pump and dump shares in US stereo company Harman International? It seems that the perpetrator was a well-connected Kuwaiti finance firm Al-Raya Investment Company. Al-Raya is 10 per cent owned by Citigroup.
Virgin Blue and Australand announce capital raisings, supported respectively by key stakeholders Virgin Group and CapitaLand of Singapore. Meanwhile, changes in the global car industry keep the drums beating for a sale of Holden and further developments in increasingly dramatic China's steel sector make for interesting reading. Plus news on Murchison Metals, SingTel and more.
.
.
Virgin Blue Holdings
Following rumours over several weeks, Virgin Blue Holdings has announced a capital raising, but at $231.4 million, the amount being raised is far less than the $400 million figure originally speculated. The fully-underwritten offer has been supported by Richard Branson's Virgin Group, as opposed to any other third party airline as cornerstone investor. No mention was made of any of these speculated parties, which include Singapore Airlines, Air New Zealand and Emirates, but Virgin Blue did say that its planned joint venture with Delta Air Lines would ensure it was well placed in the event of a market recovery. The London-based Virgin Group will be placing between $61 million and $79.9 million, subscribing for 304.9 million shares and acting as a sub-underwriter for 20 per cent of the retail component of the entitlement offer. Credit Suisse and JPMorgan have picked up the underwriting mandate for a 2.7 per cent underwriting fee and a 0.3 per cent management and arranging fee. The equity raising comprises an institutional placement to raise $21 million and a 1-for-1 renounceable pro-rata entitlement offer to raise about $210.4 million. Both components are priced at 20 cents per share, a steep 31 per cent discount to Virgin Blue's last traded price of 29 cents.
.
.
Australand Property Group
The Australian arm of Singaporean real estate group CapitaLand, Australand Property Group, has also announced a much-mooted capital raising. Priced at a 20 per cent discount to last trade, Australand's 7-for-10 entitlement offer is fully underwritten by JPMorgan and UBS to raise $475 million. Both the retail and institutional components of the raising will yield the underwriters a 0.5 per cent management fee plus a 2.5 per cent underwriting fee excluding the proceeds raised from CapitaLand. The Singaporean group owns 59 per cent of Australand and has committed to take up its full pro-rata entitlement of approximately $282 million. Australand says the raising is an integral part of its overall capital management program, which also comprises of non-core asset sales, debt refinancing and cash flow retention. Property trusts across the board have been engaged in similar initiatives since the advent of the credit crunch. Industry observers expect the raising to be followed by another secondary offer from Goodman Group in the next couple of weeks. Various sources expect that offer to be in the region of $1 billion to $1.5 billion.
.
.
Deals on wheels – Australia
Following Robert Gottliebsen's yarning with his car dealer friends, reported this morning, anecdotal evidence does seem to suggest that car sale volumes in Australia have slumped this month. Such a situation could give impetus for the never-ending speculation that Holden, currently owned by General Motors, could be sold to a Chinese automaker, specifically Dongfeng Motor Corporation. Holden is one of General Motors' best divisions, but despite the insistence of local management and the Australian government, it never gets mentioned as a "core” brands like Chevrolet, Cadillac, Buick and GMC. Holden, for better or worse, is about as core as Hummer, Saab and Saturn, three marques already sold off. And if Australia's auto market goes into a post-stimulus slump just as the United States government introduces its $US1 billion 'cash for clunkers' program, then the pressure to get out of Holden should only increase.
.
.
Deals on wheels – overseas
The automotive M&A market is at least showing signs of great liquidity and added to the revelation by a Dongfeng Motor Corporation executive that the firm was interested in Holden it is increasingly hard to not see the car-maker being sold. Just last week Sinotruk, China's biggest heavy-truck manufacturer, sold a 25 per cent stake of itself to Germany's MAN for €560 million, a deal that will give it a presence in Europe, perhaps paving the way for further acquisitions like the truck division of Sweden's Volvo. Italy's Fiat meanwhile received European Union approval to purchase Chrysler out of bankruptcy on Friday. Fiat already has a 20 per cent stake in the struggling American icon. As for General Motors' sale of its Opel division in Germany, however, Beijing Automotive is officially out of the bidding, following a breakdown in negotiations over intellectual property. Opel is now set to be sold to either RHJ International, a Belgian private equity group, or Magna International, an Austro-Canadian parts manufacturer with financial backing from Russia's Sberbank. And China isn't the only emerging powerhouse with a hunger for Western vehicle technology and brands. The entity that manufactures Fiat cars in India has raised approximately $US510 million in rupee and euro-denominated bonds arranged by Citigroup. The International Finance Corporation has also just recently helped Volkswagen's Indian manufacturer raise a €135 million loan with the assistance of BNP Paribas, Singapore's DBS, Bank of Tokyo-Mitsubishi and Socit Gnrale. And speaking of Volkswagen, the epic battle for control of Porsche is now finally over with VW purchasing the German sports carmaker. The takeover sees Porsche chief executive Wendelin Wiedeking step aside with a cool €50 million pay-off. That's enough for over 430 Porsche 911 Carreras. And with a quantity like that you'd probably get a discount.
.
.
Steel yourself – riots
Following reports out of Hong Kong that a Chinese steel company manager had been killed in rioting over a merger deal and executive pay (see Breakfast Deals: From Rio to riots), the Financial Times has reported that the merger at the centre of the incident has been postponed. After Chen Guojun was beaten to death amid a 30,000-strong riot in the north-eastern Chinese city of Tonghua, a merger between the privately-held Jianlong Group and state-owned Tonghua Iron & Steel is off. China has laid-off approximately 50 million workers since privatisation and corporatisation of its traditional state-run companies began in the 1990s. Firms like Tonghua, which employed Maoist-style management principles (or should we say Stalinist, considering the man's name association with steel), have been on the decline for some time and as China tries to make its strategic steel industry stronger in the face of trade wars with the likes of Rio Tinto further privatisations and corporatisations can be expected. The owner of Jianlong, Zhang Zhixiang, is thought to be one of the richest men in China.
.
.
Steel yourself – Colin Barnett
No Stalinist man of steel is Western Australian premier Colin Barnett, but his support for firms like Beijing-based Sinosteel Corporation is nevertheless, er, steely in the face of economic nationalism and misgivings about the role of Chinese companies in Australia. Barnett was quoted in today's Australian Financial Review saying that he would back a new bid by Sinosteel for Mid-West iron ore company Murchison Metals. Sinosteel already owns 5 per cent of Murchison and last year beat it to a takeover for neighbouring company Midwest Corporation. Barnett said the old circumstances that prevented Sinosteel from accumulating more than 49.9 per cent of Murchison had changed and that development of the company's Oakajee port warranted a more liberal foreign investment regime. Murchison is working with Mitsubishi on the $700 million Oakajee Port and Rail project. A number of Chinese companies are set to build key elements of Oakajee on a contractor basis. The West Australian newspaper has meanwhile reported that Barnett and Anshan Iron & Steel Group (Ansteel) chief Zhang Xiao Gang have signed a heads of agreement to investigate the building of Western Australia's first steel mill at Oakajee through a joint venture between Ansteel and Gindalbie Metals.
.
.
Singapore Telecommunications
Optus parent Singapore Telecommunications could raise $US3 billion to finance its participation in a merger between its 31 per cent Indian unit Bharti Airtel and South Africa's MTN Group, according to Reuters Basis Point. Goldman Sachs is said to be advising SingTel on the financing plans and its response to the proposed $US61 billion Bharti-MTN merger. Talks are expected to continue for another few weeks, sources told the financial news provider. Last week chief executive Chua Sock Koong told shareholders at the company's AGM that SingTel also continued to look at investment opportunities in China. SingTel already has stakes in Indonesia's PT Telkomsel, Thailand's Advanced Info Service, the Philippines' Globe Telecom, Pakistan's Warid Telecom and Pacific Bangladesh Telecom as well as India's Bharti and Australia's Optus.
.
.
Wrapping up
As American supermarket giant Costco makes an application to invest at least $120 million in New South Wales outlets, the bankers Woolworths has engaged at Citigroup will no doubt be spending later nights finding avenues for the retailer to grow its business in the face mounting competition in the Australian market. Amid margin-slashing fuel discount price wars and frequent flyer point scoring, Woolies is said to be eager to enter fresh new markets such as hardware in Australia and supermarkets in the United States. Another option could be the ethnic food sector, however, if Canada's leading grocery chain Loblaw Company is any example to emulate. Loblaw announced on Friday that it had made a $US225 million bid for Asian food-store group T&T Supermarket, which has 17 outlets across British Columbia, Ontario and Alberta. Australia's Asian grocery sector is dominated by mum-and-dad operators, but like Canada, the taste for Asian foods here is growing as immigration and cultural trends continue. An expansion in the sector could prove to be very tasty for Woolworths shareholders. And finally, remember last week's story about the fake takeover offer scam used by a fraudulent bidder to pump and dump shares in US stereo company Harman International? It seems that the perpetrator was a well-connected Kuwaiti finance firm Al-Raya Investment Company. Al-Raya is 10 per cent owned by Citigroup.
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