THE DISTILLERY: DJs dust

The David Jones takeover-that-wasn't saga is simply too ludicrous for Australia's business commentators to let go just yet. But there is some informative reading to be found on the subject still, with Australia's most forensic M&A regulation commentator, The Australian's Bryan Frith, weighing in. And for those readers looking for some more funny details, Fairfax's Elizabeth Knight comes through with news that Macquarie is trying to put an EB Private Equity encounter behind it.

But first, we start with The Australian's Bryan Frith.

"The heavy criticism that the board of David Jones has copped over the ‘on-off' takeover proposal from its little-known British suitor EB Private Equity smacks of shooting the messenger. The episode again highlights that something needs to be done about the lack of rules governing possible or potential takeover bids. That's not to say that, with the benefit of hindsight, DJs could not have placed more cautionary emphasis in its statements. But it is clear from DJs' response to an ‘aware' letter from the Australian Securities Exchange, seeking clarification in relation to its announcements concerning proposals from EB, that, left to itself, the company would not have disclosed the approaches at all. That's because the DJs board considered that the information provided by EB in its approaches was not sufficiently material as to trigger its statutory disclosure obligations under the ASX's continuous disclosure rule, 3.1.”

It's a very thorough piece that cannot be encapsulated in a few paragraphs. Meanwhile, Fairfax's Elizabeth Knight reports on the latest strange moment in this tale and that's the inexplicable naming of Macquarie as an adviser by EB.

"The investment bank has been drawn into the saga by having its name included in the notice given to DJs. Indeed, some time after the first letter was sent by Edgar, Macquarie was contacted by David Jones' own advisers – Gresham – informing the bank it had been cited as an adviser. A mysterious blog that broke the story last week suggested EB Private Equity was also being advised by UK based Chalkhill and Jones Lang Lasalle – both of which have since denied any knowledge of Edgar or his company. This is just another piece in the puzzle of how the Australian investing public came to be sucked into the story of a bogus bid for David Jones – one that cost them $175 million. The stock soared 15 per cent when the news was leaked and fell almost as much when the offer evaporated.”

The Australian Financial Review's Chanticleer columnist Michael Smith gets credit from The Distillery for pointing out the link between David Jones and another takeover offer that's been removed in strange circumstances.

"No one knows what they look like, where they live, or whether they even exist, but Elena Egorova and John Edgar have both had huge influence over corporate Australia in the past week. Egorova is a mysterious minority shareholder who yesterday succeeded in toppling Russian steel maker Magnitogorsk Iron and Steel's (MMK) $550 million takeover bid for Flinders Mines. Egorova, who owns as little as $US2000 worth of stock in MMK, was granted an injunction on March 30 under Russian takeover laws that allow any shareholder to take legal action against a bid. MMK walked away from the deal yesterday, citing uncertainty brought about by the court action. The identity of the mysterious Egorova, presumably a Russian citizen, has left investors scratching their heads over the past four months, although the most common conspiracy theory is that she is a front for MMK itself, which did not want the deal to go ahead. The now infamous David Jones bidder John Edgar, of EB Private Equity fame, appears to have a bit more substance than Egorova.”

And elsewhere, Fairfax's Adele Ferguson reports on falling infrastructure spending that arguably has the potential to threaten our country's already worrying productivity numbers.

"A new quarterly survey of the country's biggest construction companies compiled by Infrastructure Partnerships Australia and BIS Shrapnel, shows how the two-speed economy is distorting infrastructure expenditure – with headline national figures propped up by massive investment in mining projects. The March metric reveals that outside of mining, key spending has fallen to its lowest levels in seven years. Non-mine commitments fell back to an index of 82.9 in the quarter, well below the average of 113. Transport infrastructure was the worst hit, falling to 68.7 as state governments reduced their commitment to roads and rail as they continued to cut spending to protect their AAA credit rating, or in Queensland's case tried to restore it. Of the $27 billion of infrastructure spending under way at the end of the March quarter, more than $20 billion is privately funded, with most of that dedicated to private mining related projects. That means little progress is being made against the country's $770 billion public infrastructure backlog.”

The Distillery has no quarrel with Ferguson's piece. However, we would like to redirect readers of an article by Ferguson's fellow Fairfax writer Jessica Irvine, where she offers up some research that seriously questions the severity of Australia's falling productivity.

This morning, Irvine writes on the predictable move by the Reserve Bank yesterday to keep interest rates on hold, adding that Governor Glenn Stevens appears to be alert but not alarmed by the issues in Europe, China and the US. Her colleague Malcolm Maiden writes that yesterday's decision was never in doubt.

Meanwhile, The Australian's Judith Sloan, a professor and economist in her own right, says the call by former Reserve Bank board member Warwick McKibbon that rates should have been raised yesterday was a step too far.

Elsewhere in economics, Fairfax's Ross Gittins agrees with research by Bank of America Merrill Lynch economist Saul Eslake that points to house prices rising by 3-4 per cent per year for the next decade. Fairfax's Michael Pascoe writes of the prediction by Westpac that the financial services sector won't grow at previous break-neck speeds because there are series of factors that will simply prevent it from doing so.

Still in banking, Fairfax's Malcolm Maiden says the Libor manipulation scandal in Britain illustrates how, as always, Europe's biggest problem has been its banks. And Fairfax's banking writer Eric Johnston writes that the profit warning at Bell Potter Securities is indicative of the equity malaise.

In company news, The Australian's Criterion columnist Tim Boreham offers some hope for Flinders Mines, now abandoned by its suitor, that a white knight might swoop in to aid its funding costs quite soon. The Australian's John Durie looks at the growing interest in, and share price of, Treasury Wine Estates. And The Australian's Barry Fitzgerald says the market might need to get used to seeing big takeover premiums in the gold sector, like that of St Barbara for Allied Gold.

Fairfax's Gareth Hutchens delivers a fascinating story about Gina Despres – now a principal executive for four global mutual funds, but once a founding member of Australia's notorious OZ magazine. Specifically, Despres is worried that the US election mightn't produce a mandate, leaving the politics in a funk and the nation's pressing economic matters unresolved.

And finally on the DJs story, The Australian Financial Review's Alan Stokes delivers a timeline of the DJs offer and has a great deal of fun doing it. And a person going by the name of Dick Smith – there's no indication in the online version of the article that it's the one you're thinking of – writes in Fairfax newspapers that the David Jones episode underlines how vulnerable Australian companies are to foreign interference… sounds like Dick actually.