THE DISTILLERY: Tinkler teaser

Jotters try to work out what Nathan Tinkler is up to with his offer to Whitehaven Coal, while one applauds Macquarie's timing at Echo.

Nathan Tinkler’s deft touch when it comes to deal-making means that Australia’s business commentators simply can’t ignore the latest news out of Whitehaven Coal, which was actually a mere scrap of information. But many of them just can’t take the mining magnate’s "highly conditional and incomplete” proposal seriously – and they all use that word.

The Australian’s Barry Fitzgerald, under the headline ‘Below $6 is not a serious offer for Whitehaven’, points out that Tinkler’s net worth has sunk $425 million since the deal with Aston was done.

"If Tinkler's intention was to draw a line under the slide in the value of his Whitehaven stake, his non-binding proposal worked a treat, with Whitehaven shares bouncing 18c higher to $4.18. But that would be underselling Tinkler's clear ability at deal-making involving coal assets. Whitehaven boss Tony Haggarty, for one, has left open the possibility that Tinkler will come back with a ‘less conditional and more complete proposal’. But unless Tinkler and associates can land a cash offer on the table of more than $6 a share, we really are getting excited about nothing. As it is, raising that sort of money to pay a premium to market for what it already a well-run and well-focused company is one hell of an ask in these troubled times for both equity and financial markets. Any chance of success for Tinkler with a fully-baked proposal will depend on the quality of his partners. If he can line up Japanese and Korean coal buyers and traders with deep pockets, he will be in with a chance.”

The Australian Financial Review’s Chanticleer columnist Tony Boyd, opts for the same word as he asks "Is Australia’s youngest mining magnate, Nathan Tinker, serious”.

"That’s the obvious question to be asked following Whitehaven’s revelation that a ‘Tinkler Group ¬consortium’ had made an indicative, non-binding proposal to potentially privatise the company. Conditional proposals are often leaked to put pressure on the board of directors of the target company. In most cases this has involved a private equity group leaking the conditional proposal, as happened last year with the Pacific Equity Partners plan to take over Spotless Group. However, PEP, which was serious and ultimately successful, revealed the price it was willing to pay to gain ¬control of the services company. As with most bids, the initial offer from PEP was low ball and had to be raised to get a board recommendation for a scheme of arrangement.”

The Sydney Morning Herald’s Ian Verrender says Tinkler is taking the road less travelled strategically – and there’s that word again.

"But if Tinkler is serious about a privatisation, his strategy certainly seems to defy orthodox practice. Most people contemplating a large purchase on an open market generally attempt to buy in at the cheapest possible price. Sometimes that can involve a degree of subterfuge and secrecy to ensure the element of surprise. Take James Packer's raid on Echo Entertainment late last year. Back then investment bankers acting on his behalf took possession of a large stake in the casino group via a series of transactions on complex financial derivatives. Packer's hand was revealed only at the last minute when it emerged that his Crown Group had increased its stake to the 10 per cent shareholding limit. It appears Tinkler isn't having any of that action. He's out there, loud and proud, even before he has a final deal prepared. Or, rather, his representatives are, given Tinkler's recent relocation to Singapore.”

And The Australian Financial Review’s Matthew Stevens, completing the quartet of very ‘serious’ business commentators, hits a similar note to Fitzgerald when he points out that analysts have an average price target on Whitehaven of $6.27.

"The first thing to digest is that Tinkler already owns 21.6 per cent of Whitehaven from its April merger with his majority owned Aston Mining and his wholly owned Boardwalk Resources. The second is that Whitehaven’s share price has lost 20 per cent since its deal with Tinkler was confirmed in December and it is widely held that Australia’s biggest listed coal play is trading at a severe discount to underlying value. Tinkler has proven himself to be a bit of a savant in the buying and selling of coal assets. The trick here is working out which outcome he is really seeking to achieve. Is Tinkler merely looking to put some heat in the Whitehaven price ahead of delivering his stake to new ownership or does he really have Asian supporters willing to stump up with readies enough to take mergeco private?”

In other company news, The Age’s Adele Ferguson says Macquarie Group’s substantial shareholder stake in Echo Entertainment couldn’t have come at a better time with an equity raising set to land this morning. Speaking of takeover targets, The Sydney Morning Herald’s Elizabeth Knight examines the board amid speculation that more parties are starting to look at Qantas Airways – private equity is considered a long shot.

In regulatory affairs, The Australian’s John Durie reminds the NSW government that, in the wake of the AGL acquisition of Victorian Loy Yang power station that the competition watchdog is worried about excessive electricity consolidation. The Age’s Adele Ferguson believes that the Australian Securities and Investments Commission has zeroed in on a few companies that have suffered share price tumbles to warn them of their need to make sure carrying value of their books is represented in fair value. Some of those companies have tumbled on earnings revisions and Fairfax’s Insider columnist Ian McIlwraith heralds the arrival of guidance alterations as another financial year comes to an end.

On economic matters, The Age’s economics editor Tim Colebatch finds a grumpy Reserve Bank of Australia governor Glenn Stevens urging Australians to adapt to the new economy. The Australian’s Richard Gluyas reveals that corporate leaders came away from the Gillard government’s economic forum confident that Australia is in a good position to withstand the fallout from Europe’s problems. But The Australian’s economics editor David Uren laments the complete loss of momentum towards tax reform with the now largely forgotten Henry tax review. And The Australian Financial Review’s Jennifer Hewett throws a sceptical glare towards the government for its latest endorsement of lower corporate taxes – rightly so.

In regional news, The Australian’s Robin Bromby says Mongolia is shaping up as a major competitor for Asian commodity sales. The Australian’s Asia Pacific editor Rowan Callick reveals the last minute impasse to a free trade agreement with South Korea is Canberra’s refusal to allow foreign firms to arbitrate in third countries.

And finally, The Age’s Michael West says the flight of capital has been so extreme that it’ll now cost you to take out Swiss bonds.


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