Money for the asking

Multiplex and Investa. There are two big “live” bids in the listed property trust sector and in both cases investors could make money.

The Roberts family, holders of 26% of Multiplex, have accepted the Brookfield bid out of Canada. I think it’s highly unlikely that anybody else will come in; however there's always a chance.

Now you can currently buy Multiplex about 2% below the current bid, so in the worst-case scenario you’ll make 2%, and just in case someone else comes in you’re buying the upside there with virtually no downside.

With Investa Property Group you've got more or less the same situation. It appears that Morgan Stanley has paid a very steep price. It was 30–40% higher than what the stock had traded at previously. Most people said it’s a knockout offer. Again, however, you can buy the stock at about $3.01. The bid is $3.08, including the dividend, so again you’ve got about 2% there. And just in case someone else does come in, you’ve got a free option on the ups

What's happening? I think some of these Australian property trusts have been quite clever and they’ve bought into places like the US, Japan and Germany in the past few years when property assets seemed relatively cheap compared to here. Now the wheel has turned a bit and you’re seeing the same global funds wishing they had bought those assets.

I'd be looking at assets such as the Rubicon trusts. There’s a Rubicon Japan Trust, a Rubicon Europe Trust and a Rubicon America Trust, for example. They might be of interest to a potential buyer.

Great Southern Plantations. Managed investment scheme stocks such as Timbercorp and Great Southern have had their share prices hit pretty hard in the past six months – ever since the Federal Government said that beyond this year it would not allow the upfront tax deductibility of non-forestry MIS schemes. Both these stocks have non-forestry schemes as well as forestry schemes.

Now, after their stock was sold off, both Timbercorp and Great Southern have had takeover approaches. The bidders are almost certainly financial institutions such as Macquarie Bank or Babcock & Brown.

The investment banks are attracted to income streams from management fees and land banks that are built up in each of these companies.

I think Great Southern and Timbercorp have also been quite clever in reserving water allocations with a very high security that a lot of farmers and irrigators don’t have. Whatever you think of MIS schemes and these types of stocks there's no doubt they are attractive to investment banks, but we're still waiting for banks.

Wesfarmers and Coles. Wesfarmers is both a predator trying to bid for Coles – and a target itself with some very attractive assets including Bunnings but also coal interests.

Now Wesfarmers has announced it is going to increase the scrip component of the Coles bid from 25% to 40%. Now, let’s just remember we don’t know what price yet Wesfarmers is going to bid, so Wesfarmers says, 'We’re going to increase the scrip component from 25% to 40%’ – but of what total?

Well, the minimum has to be $16.47 and there was a big opportunity last week a couple of times where you could buy stock at or just below that level, which is a giveaway because the board has announced they will sell to the highest bidder. Wesfarmers can’t bid any less than $16.47, so at about $16.50 you are not going to lose money and there’s a very good chance you will make some.

We're still to see Woolworths play its hand. This is a one-off opportunity for Woolworths to get some of the assets out of Coles that they would be allowed to own such as Target.

The Coles board has said June 25 is when they want bids submitted, so it’s still a very interesting situation notwithstanding the fact that some of the private equity buyers have dropped away.

Gloucester Coal. The coal industry has been struggling to deal with bottlenecks at key ports in Queensland such as Gladstone and now they've had floods, which will make things worse. Coal prices could rise and one of the outcomes of this attention is that investors are looking again at the attempt by global resources company Xstrata to take over Gloucester Coal. I know that several hedge funds are not going to accept this bid as it stands.

The Gloucester board has agreed to a $4.75 a share, but you'll notice the stock is now trading about $4.90, a 2.5–3% premium. Some people are saying that given the amount coal prices have risen in the past few months Xstrata might have to revise its bid. It’s certainly a possibility and that means other coal companies have to be looked at. Macarthur Coal, for example, or Centennial Coal. If hedge funds and shareholders start pushing for a higher bid anything could happen – look at what happened with Qantas.

Sigma – Healthscope and Symbion. Everyone is waiting for Sigma to stop talking about a bid and to actually put in an offer. Every time the health sector gets looked at all the normal rules about how takeovers are conducted seem to get thrown out the window. Companies stand up and make announcements, saying 'We intend to bid’ and they still haven’t said what price. Now Sigma is talking about rivalling Healthscope with a bid for Symbion and it has to be more than Healthscope’s $4.30 offer.

There’s confusion about whether Sigma really wants to bid for all of Symbion. I don’t think it would be allowed to buy all of it. It is working with another private equity consortium so they could bid for the whole company and split up the assets or they might just bid for the assets they want, leaving Healthscope wanting to buy the bits that it wants.

Again, in common with several situations I see in the market at the moment, I guess the minimum level of any bid from Sigma is a premium to Healthscope.

* Sigma, in conjunction with CWC, finally lodged a $1.09 billion bid for the consumer and pharmacy services divisions of Symbion late Monday (June 18). CWC is an arm of investment bank Carnegie Wylie - a shareholder in Eureka Report.

Queensland Cotton. This has been a ping-pong game and the latest shot was from Louis Dreyfus, the global conglomerate, which has bid $5.85 unconditional. Singapore-based Olam has been the other bidder all the way on this one, so there is every chance Louis Dreyfus might come back again, especially since it is the firm the Queensland Cotton board prefers.

The stock is trading around $5.90 so your downside to $5.85 is 5¢, or less than 1%. (I must declare an interest here. My company, MM&E Capital, has accumulated a stake in Queensland Cotton.)

I expect this week we’ll know whether Olam intends to increase the bid or not. Again, limited downside, potential upside.

nTakeover Action June 11-15, 2007
Date	Target	ASX	Bidder	(%)	Notes
5/24/07	Allstate Explorations NL	ALX	Beaconsfield Gold	82.80	Closing July 12
5/15/07	Auspine	ANE	Gunns	25.80
6/8/07	Avantogen	ACU	Chopin Opus One LP	87.62	Effective May 17.
6/15/07	Bakehouse Quarter Fund	BQF	Pelorus Property Group	23.79	Suspended ahead of delisting.
6/13/07	Becker Group	BKR	Prime Television	24.22	Paul Ramsay Holdings, with 17.6%, will accept. Closing July 12.
6/12/07	Bremer Park	BML	Walker Corporation	18.21
3/2/07	Chiquita Brands S Pacific	CHQ	Timbercorp /Tradefresh	80.93
3/9/07	CCI Holdings	CHL	Bureau Veritas	19.90
6/13/07	Colorado Group	CDO	ARH Investments (Australia)	84.60	New offer for balance at $6.20.
5/29/07	E*Trade Australia	ETR	ANZ Banking Group	94.80	Suspended.
5/31/07	Iberian Resources	IBR	Tamaya Resources	86.21	Recommended offer. Closing May 31
5/21/07	K2	KTO	Tomahawk Energy	90.10	Closing May 23.
3/26/07	Lionore Mining International	LIM	Xstrata	19.00	Lock up agreement. Closing May 25.
5/4/07	Lionore Mining International	LIM	OJSC MMC Norilsk Nickel	0.00	"Superior to Xstrata offer."Closing June 18.
4/17/07	Magna Pacific (Holdings )	MPH	Lionsgate Australia	11.78	Closes June 15. Unconditional
4/26/07	Marathon Resources	MTN	Crosby Capital Partners Inc	0.00	Closing date extended to July 4. Price increased from 68c to $3.52
4/13/07	OmegaCorp	OMC	Denison Mining Corp	33.18	Extended to April 13
6/13/07	OmegaCorp	OMC	Central African Mining & Exploration	20.00	Pre-bid arrangements for 19.997%. Bid withdrawn.
2/14/06	Orion Telecommunications	OTL	Toy Telco/Lewis Securities	8.89
3/6/07	Pacifica Group	PBB	Robert Bosch	72.45	Closing March 4
6/13/07	Queensland Cotton Holdings	QCH	Olam International	7.80	Free of US Hart Scott Rodino (anti-trust) condition. Closing June 22
6/4/07	Queensland Cotton Holdings	QCH	Louis Dreyfus Cotton Int	19.96
2/28/07	Queensland Gas	QGC	TCW/Societe Generale	0.00
6/14/07	Rinker Group	RIN	Cemex Group	56.90	Closing date extended to June 22. FIRB approval. Directors recommend higher offer.
6/5/07	Rocklands Richfields	RCI	Bowen Energy	0.00
6/14/07	Sonnet Corp	SNN	Commoditel	68.70	Closing July 9.
5/9/07	Sydney Roads Group	SRG	Transurban Group	95.34	ACCC not to oppose. Unconditional. Compulsory acquisition.
6/7/07	Tourism Holdings	THL	MFS	14.04
6/8/07	Volant Petroleum	VOL	Sky Energy Investment/Karl Thomson Holdings	91.25	Unconditional
nScheme of Arrangement
4/11/07	Alinta	AAN	Babcock & Brown; Singapore Power		Vote mid-August
5/3/07	Bolnisi Gold NL	BSG	Coeur D'Alene Mines Corp	19.99	No vote date set.
6/8/07	Consolidated Minerals	CSM	Pallinghurst Resources/AMCI		Vote July 9.
5/7/07	Evogenix	EGX	Peptech	19.99	Committed. Vote due August.
5/31/07	Investa Properties	IPG	Morgan Stanley Real Estate	0.00	Vote August.
4/17/07	Macquarie Prologis Trust	MPN	Prologis	0.00	Vote mid-to-late June
6/15/07	Magna Pacific (Holdings)	MPH	Destra Corporation	0.00	Vote July 30.
5/1/07	PowerTel	PWT	Telecom Corporation of New Zealand	58.25	Suspended.
4/20/07	Promentum	PPR	Pacific Print Group (Australia)		Suspended
4/13/07	Scarborough Minerals Plc	SRB	MinSec BVI	0.00	Vote June.
5/29/07	Symbion Health	SYB	Healthscope	0.00	Vote August.
6/14/07	Veda Advantage	VEA	Pacific Equity Partners and Merrill Lynch Global Private Equity	0.00	Shareholders approve scheme.
nForeshadowed Offers
5/15/07	Ausdrill	ASL	Approach from $2 billion party	0.00
4/5/07	Coles Group	CGJ	Wesfarmers/Macquarie Bank consortium	12.80	Indicative scheme of arrangement offer
5/14/07	Flight Centre	FLT	Pacific Equity Partners	0.00	Sale of business into JV, buyback, div; exit option for small shareholders
6/12/07	Great Southern	GTP	Unnamed party		Expression of interest.
6/12/07	Multiplex Group	MXG	Brookfield Asset Management	29.80	Board supports offer.
6/7/07	Smorgon Steel	SSX	Onesteel	19.98	ACCC not to intervene in proposed offer.
4/17/07	Southern Cross Broadcasting	SBC	Macquarie Media Group	0.00	Continuing discussions.
5/1/07	Symbion Health	SYB	Healthscope consortium	0.00
6/6/07	Viking Industries	VKI	Shareholder consortium		Conditional offer at $1.09. 2-3 week delay on formal offer.
6/15/07	Warehouse Group	WHS	Woolworths		NZ Commerce Commission declines approval of an offer. Woolworths appeals to NZ High Court
6/8/07	Warehouse Group	WHS	Foodstuffs Co-operatives		NZ Commerce Commission declines approval of an offer
nBackdoor Listing
4/16/07	Mark Sensing	MPI	Sonofax Holding	63.00

Source: NewsBites