Executive Summary: September 28, 2009
By Scott Rochfort | smh.com.au | 28 September
MFS founder Michael King enjoys a chukka or two in the Elysian Fields.
CBD
Green's 452 reasons to be neighbourly
Babcock & Brown's former chief, Phil Green, appears to have quietly leased some office space in the Sydney.
The talk is that Phil has taken some A-grade office space on Hunter Street, just down the hill from his former offices at Chifley Square.
While Phil and his old chum Jim Babcock (aka Babcock & Green) still have an interest in the veterinary sector – through their share in a chain of pet doctor clinics – there are reports he has also taken an interest in the distressed debt game.
There is no doubt one of Phil's new neighbours, the Peter Morgan 452 Capital-managed Century Australia Investments fund, will be keen to catch up. In its annual report released last week, the listed investment fund proudly replayed some quotes provided by Phil at a Deutsche Bank investor presentation in April 2008.
"What the *�0;0; is 452 Capital doing here? 452 doesn't think we have a business model," Phil reportedly said.
Moving along
Michael Minosora obviously knows a great career opportunity when he sees one. Minosora quit his role as chief financial officer at Fortescue Metals Group (market cap $12.4 billion) to become chief executive at the former Burmese pearl farmer-cum-bauxite miner Atlantic Limited (market cap $31 million).
He was at Fortescue for eight months. Minosora is a former senior Ernst & Young managing partner, senior Woodside executive (of four months) and managing director of Fortescue adviser Azure Capital.
Show business
Wizard Home Loans founder Mark Bouris will make his TV debut tonight as Australia's version of the Amstrad Computer inventor Alan Sugar.
This column will not give away any clues on who will be fired from the first episode of The Apprentice.
But Bouris appears keen on developing some new catchphrases beyond the simple "You're fired".
"Cop it sweet, that's the way it is", "Behind every successful product is a successful brand", "All show no go", are some of the terms used by Bouris in the new show.
Of king and gods
The founder of the collapsed MFS Limited, Michael Christodoulou King, offers some thoughtful words for the investors (and creditors) who lost billions of dollars in his investment group and its various satellites.
From his Elysian Fields polo farm outside the Gold Coast, the Greek middle-named King seems happy in the polo farm named after the ancient Greek afterlife.
"The Elysian Fields is a wonderful place, where everything was delightful," notes the polo farm website. "There were soft green meadows, lovely groves, a delicious life-giving air, sunlight that glowed a soft purple and everyone was happy and peaceful.
"It was a place where the great and good lived after their deaths, men such as heroes, poets, priests and those who helped others; a dwelling place of mortals madeimmortal through the favour ofthe gods."
Back on earth
King's co-MFS founder Phil Adams, however, appears less transfixed on the afterlife.
His Agilis Global outfit in Dubai is still advertising "for exceptional people" to join its team. "The strength of our business relies on the strength of our people, and we encourage you to contact us if you share our vision and want to join a successful team," says Adams's website.
Adams's new investment banking and advisory firm apparently is a good corporate citizen.
"Our business is conducted with ethics and integrity, with a corporate governance structure that underpins a sustainable business and enhances our reputation."
A case at pace
Australia's last formula one world champ Alan Jones appears to have hit a pothole as his team prepares for next month's other formula racing event, the A1, on the Gold Coast.
The A1 is the little-known racing series launched by the Al Maktoum ruling family of Dubai, which Ireland won last year.
Jones's A1 Team Australia Pty Ltd had a pitstop in the Sydney District Court on Friday where it continued to fend off a $300,000 claim from its former media and marketing team, Jam Management, which is led by Andrew Fraser.
It seems Jam Management is chasing some money Jones's team allegedly never got around to paying it when it terminated its contract last year.
With the threat that some drivers at the Gold Coast event (who have lodged affidavits for both sides) could be forced to make a detour to a Sydney witness stand for a seven-day hearing, Justice Richard Rolfe ordered both sides into mediation.
"Mediation might get the balance back into play," he said. Luckily for the A1 and Team Australia, any future court dates will be scheduled for after the Gold Coast race.
But the A1's new backer, the British hedge fund RAB Capital, seems to have more to worry about amid continuing concerns over the financial state of the entire racing series.
Got a tip? email srochfort@smh.com.au
Insider
Edited by Jamie Freed
Sinochem waits in wings at Nufarm
It has been more than two months since Nufarm revealed it was in takeover talks with China's Sinochem, and there has been little in the way of an update since.
However, Nufarm will release its annual results this morning, and Insider has heard a transaction – or at least a significant update on progress to date – could be announced at the same time.
What is clear is that Sinochem has not walked away from the potential $2.5 billion deal. There have been predictions from analysts that Nufarm, advised by UBS, and Sinochem, advised by RBS, could strike a deal at up to $14 a share, although a spate of earnings downgrades by Nufarm is unlikely to have assisted its bargaining position.
That compares with the price of $11.25 a share at which Nufarm raised $300 million in May. Its managing director, Doug Rathbone, sold $19.7 million of his holding at that time but has retained 11 per cent of the company.
Nufarm closed at $11.14 on Friday. Nufarm's latest guidance was for a profit of $135 million to $145 million excluding significant items, but that came with the caveat that it was subject for review.
Macquarie Equities last week noted the potential for further earnings risk to the downside, but said that was unlikely to matter much in the Sinochem deal because Nufarm would provide a strong distribution platform over the longer term.
A bid from Sinochem will require Foreign Investment Review Board approval.
Shopping bag
The Myer prospectus, to be released online with much fanfare this morning, will provide only a broad indication of what the register may look like after its $3 billion float.
As noted last week, TPG, which with Blum Capital owns 84.2 per cent of Myer, is not expected to make a final decision on whether it will retain shares in the department store until an institutional bookbuild in November.
So the prospectus will release a range of possible outcomes for the number of shares available to investors, pending a final decision by the private equity group.
Another ongoing uncertainty will be the total amount of debt. Holders of Myer's hybrid notes, which are trading at 5 per cent above their face value, can convert them to shares at a 2.5 per cent discount to the float price or hang onto them until 2013, when they will be redeemed at face value.
Bell Potter analysts have noted Myer's net debt-to-equity ratio is at 183 per cent ahead of the float.
Myer has $879 million of debt, including the hybrids, $185 million in cash and just $380 million in equity.
Myer is expected to use the proceeds from the float to lower its debt to $450 million or so, and the amount of equity will increase substantially.
What's my line?
There appears to be a consensus in the market that Telstra is highly unlikely to compete against NBN Co Ltd, the company established to deliver the national broadband network, and is instead more likely to transfer fixed-line customers to the network over time as part of a structural separation.
That way, Telstra can likely keep its 50 per cent stake in Foxtel, which allows it to be a one-stop shop for customers seeking fixed-line, mobile, broadband and cable services.
If it sold the Foxtel stake to News Corp and Consolidated Media, Foxtel could bundle services itself and sell it to customers once the national network is operational.
If it cuts a deal with a mobile provider, it would be able to offer exactly the same bundle of services as telcos such as Telstra. Foxtel already reaches 30 per cent of Australians and could be a formidable competitor against Telstra and Optus.
But while a structural separation appears to make more sense than a functional separation that caused the loss of Foxtel, the key will be compensation. Telstra is said to have a team of about 20 bankers from Macquarie Capital working out the best structure for a separation.
They are sure to be focusing on strategies to extract the maximum value from the Government in return for switching customers and likely the duct network to NBN over time.
NBN has hired KPMG and McKinsey to investigate ways in which the fibre-to-the-home network will be financed, built and operated.
Those consultancies are more known for their exhaustive analysis than for their negotiating skills.
Therefore, it is not surprising to hear suggestions that a few investment banks are likely to knock on NBN's door, arguing it needs their firepower against Telstra and Macquarie when it comes time to hammer out a compensation deal.
Analysts at Macquarie Equities have estimated Telstra could extract $9 billion to $18 billion for its fixed network assets. Goldman Sachs JBWere suggests closer to $8 billion.
Flight and fight
In an interesting coincidence, two associates of Global Airports will face off against Macquarie Airports in the NSW Supreme Court today at 2pm – the exact deadline for proxies to be filed ahead of a planned shareholder meeting on Wednesday that would see MAp's management internalised in return for a $345 million payment to Macquarie Capital.
GAP's only realistic chance of preventing approval of the deal would appear to be a legal ruling in its favour.
An injunction could postpone the meeting pending additional disclosure of change of control clauses and lead to a new round of voting. GAP maintains it is very serious about its proposal.
However, the slim likelihood of success has some observers wondering if the objective is to fire a warning shot to Macquarie about the terms of management internalisation deals it hopes to strike with the independent directors of other listed satellites, such as Macquarie Infrastructure Group.
For its part, Macquarie does not appear to have been shaken by GAP's tactics and has noted the performance of the Hastings Australian Infrastructure Fund, previously run by GAP leader Mike Fitzpatrick, is nowhere near as good as MAp under Macquarie's management.
jfreed@smh.com.au
First published by Smh.com.au on September 28 2009
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