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CBD

Myer hawkers put best face forward

There are three types of workers at Myer Holdings: executives, employees and "special team members".

In its recent prospectus the retailer dedicated a whole section to its only "special team member", Jennifer Hawkins, the former Miss Universe who is the face of the company until 2012.

It even outdid the private equity float of Pacific Brands by using more pictures of Hawkins than Pacific had run of the Bonds-loving Sarah Murdoch. But Myer's chief executive, Bernie Brookes, seems to be a special team member, too.

He will have between $46 million and $58 million worth of shares heading into the float and receive $9 million in other options.

Add to that a $200,000 raise on his base salary (to $1.65 million) and, it seems, he will continue to receive $87,000 a year in "rental assistance".

If his contract is terminated, Brookes will be paid out 18 months of base pay. But he has an interest in making sure things hum along for now.

Under an escrow agreement, he can only sell 25 per cent of his shares within 18 months of listing.

Bernie plans to sell 10 per cent of his stake into the float. Myer's former executive chairman and dinosaur hunter Bill "Moa" Wavish should also be able to get by on the $46 million to $58 million worth of shares he owns in Myer (with no escrow restrictions) and 480,000 unvested options.

This is a tad better than the $8.2 million the former Myer boss Dawn Robertson was paid in the year the retailer was sold by Coles to its private equity owners.

Shopping spree

Neither the private equity firms TPG and Blum Strategic Capital nor the Myer family have left themselves out of the Myer gorgefest.
 
Up to $1.9 billion from the $2.3 billion raising will be used to buy out existing shareholders.

Not bad given the business was bought from Coles for $1.4 billion in 2006 and has already had several hundred million dollars sucked out by its private equity owners.

For instance, there was the $560 million dividend and capital return payment made in August last year.

The joint lead arrangers of the float, Credit Suisse, Macquarie and Goldman Sachs JBWere, should also get enough to tide them over for the summer holidays.

They will collect a fee of 2 per cent of the proceeds of the initial public offer (up to $47 million). In its prospectus, Myer notes it "may also elect, at its absolute discretion" to pay the bankers an additional $23.4 million in fees.

The part-Myer family, part-Blum owned retailer also picked an interesting day to lodge its prospectus. Yesterday was the Jewish day of atonement, Yom Kippur.

Making a killing

The pest-killing powerhouse Nufarm did not let a 42 per cent slump in full-year profit prevent it from rewarding its managing director.

Doug Rathbone received a $923,000 cash bonus and an 11 per cent raise in base pay to $1.25 million.

Nufarm impressed the market this year by issuing a profit downgrade within a month of raising $300 million from shareholders.

In for a fidel

The former Telstra mouthpiece and anti-communist freedom fighter Phil Burgess showed he was still a bit rusty on his geography after jetting in from the US to lambast the local regime of Kevin "Fidel" Rudd.

"We have one Hugo Chavez in the Southern Hemisphere ... we don't need another one," he told ABC television over the weekend. Venezuela is just north of the equator.

Defensive play
 
The iron ore explorer Stellar Resources seems keen for a takeover bid from China.

The company, which has a sharemarket value of $9 million, yesterday dispatched a statement to the Australian Securities Exchange headed "Tarcoola Iron Ore Project Outside of Woomera Prohibited Area".

In light of concerns raised by the Defence Department over a Chinese company buying into Western Plains (which operates in the prohibited area), Stellar said it "had no restrictions placed on its exploration activities within these licences by the Department of Defence".

Ego strokes

Fortescue Metals Group's chief pin-up boy, Andrew Forrest, has admirers across the globe.

Sean Gilbertson, son of the former BHP Billiton chief Brian "The Ego" Gilbertson, nominated Twiggy as the person he admired the most. More, even, than his father.

In an interview with The Times in London, Sean celebrated the "indefatigable Andrew Forrest, of FMG, for his dogged determination in delivering his grand vision despite a sea of naysayers".

Gilbo jnr also revealed some unorthodox relaxation techniques. Not for him yoga, swilling beer or lying down to chill out, but relaxation "by listening to the wind (or silence) in southern Namibia".

Got a tip? email srochfort@smh.com.au

 

 

Insider

Edited by Jamie Freed

China's biggest bids stray from the mining domain


The recent record pace of acquisitions by Chinese companies shows no sign of abating.

The latest is Sinochem's $2.8 billion bid for Nufarm yesterday.

Dealogic figures show Chinese companies have made $US12.5 billion ($14.5 billion) of offers for Australian companies so far this year, up nearly fivefold on the $US2.6 billion during all of last year.

Based on its $US3.3 billion enterprise value (equity plus debt), the Sinochem-Nufarm deal is the largest outright bid from a Chinese company for an Australian company.

Most of the other deals have been struck in the mining sector but, surprisingly, the second largest deal was Allco Finance Group's sale of its aviation business to Hainan Airlines and Bravia Capital Partners.

However, it must be cautioned that despite a heads of agreement being signed and a break fee established, the proposed Sinochem-Nufarm scheme of arrangement is hardly final.

Not only does it require the completion of due diligence and approval from the Foreign Investment Review Board, but the emergence of a rival bidder cannot be completely ruled out.

Insider hears that Nufarm has received some informal approaches from prospective rival bidders since it revealed it was in talks with Sinochem in July.

None of those approaches resulted in a proposal to rival that of Sinochem, but now that a defined figure of $13 is on the table, perhaps some will take another look.

Goldman Sachs JBWere said it was not unreasonable to expect some interest from a generic producer like Mahkteshim Agan Industries, while others have also named United Phosphorous as a potential bidder.

Nufarm shares closed 82c higher at $11.96 yesterday.

Price of Myer

Now that the Myer prospectus has been released, investors are wading beyond the hype to take a more rational look at the business.

The wide range of issue price outcomes – between $3.90 and $4.90 a share – took some investors by surprise.

At the bottom end, that would value the company at a 2010 earnings multiple of 14.3, while the top end would represent a multiple of 17.3.

David Jones is trading on a multiple of 17.8. Myer expects to pay out 70 to 80 per cent of its profits in dividends.

DJs has a policy of paying out no less than 85 per cent, but in the past few years it has paid out more than 90 per cent.

Myer's boss, Bernie Brookes, tried hard to promote the idea of expanding to 100 stores at some undefined point after 2014, but the market was more concerned yesterday about its lack of sales growth under private equity ownership, despite opening four stores since that time.

Fund managers said Myer was likely to have a difficult time getting the float away at the top end of the price range, with more than one expressing reluctance to pay more than 16 times earnings in light of past private equity floats which have stripped out too many costs in order to achieve short-term gains.

The final price will be announced on October 30, after an institutional bookbuild that will also decide whether TPG and Blum Capital will sell their entire holding to the public or keep up to 13.5 per cent of the company for at least a year.

It remains to be seen whether the float will represent a bonanza for investors, of whom about half will be retail investors and half institutional. However, it is guaranteed to prove a winner for the slew of brokers and advisers involved.

The expenses for the listing, led by Goldman Sachs JBWere, Macquarie Capital and Credit Suisse, would be about $83 million at the mid-point of the indicative price range.

Board cohesion

Investors are starting to wonder whether Fairfax Media's independent directors and John B. Fairfax's Marinya Media will ever be able to set aside their differences and restore the boardroom's functionality.

Roger Corbett, deputy chairman of the publisher of the Herald, was canvassing institutions yesterday about whether they would prefer he took the chairman's job or the board search for an outside candidate in the wake of Ron Walker's resignation.

That coincided with the release of a statement from the independent directors, including Corbett, which sought to clarify some issues lest the market be "ill-informed".

Fund managers said Marinya appeared to have a better track record than the Fairfax independent directors based on the historical performance of Rural Press versus Fairfax.

However, they noted Marinya had in effect appointed the managing director, Brian McCarthy, and that it was well represented on the board in light of its 9.7 per cent stake.

Despite the hostility displayed by the board factions to date, some observers argued there was room for a compromise, noting the propensity for political parties to reunite following tough leadership tussles.

Meanwhile, a board committee finalised the notice of meeting for its November 10 annual meeting yesterday without listing a potential replacement for Walker.

It will recommend against the election of Stephen Mayne, Gerard Noonan, and Steve Harris, who are now the three candidates for the open slot. It would require approval from a majority of shareholders to elevate one of those to the board.

However, that would seem to be less of a long shot than usual. It will be interesting to see whether proxy advisers recommend any of the trio, all of whom once held editorial roles at Fairfax.

jfreed@smh.com.au

 

Briefs

 

 

B&B power

Deadline setback Babcock & Brown Power's negotiations with its banking syndicate over $2.6 billion in debt have been delayed, but the company said it was confident of reaching an agreement. The debt-laden utility said it expected to reach an agreement on restructuring the debt by mid to late October, missing the previous deadline of the end of this month.

Banking

NABambition The business banking division of National Australia Bank is looking to become the top institutional bank among the big four within the next 18 months. NAB is now lagging in fourth place but hopes new management and a reorganisation of the operation will improve its profit performance and standing.

Electricity

Infratil lines up Infratil Energy, a New Zealand power company, is preparing to bid for some of the energy assets to be sold by the NSW Government. Infratil owns three power stations in Australia and 81.2 per cent of Perth Energy.

Gambling

Woolies on notice Woolworths will have to explain to shareholders why it operates 11,000 poker machines in company-owned pubs around the country. The anti-pokies crusader and independent politician Senator Nick Xenophon has collected enough signatures to force the issue on to the agenda at its annual meeting in November.

Geothermal

Origin buys in Eden Energy's plan to develop its South Australian geothermal interests has been boosted by a deal with Origin. Eden has agreed to sell Origin a 70 per cent interest in Geothermal Licence Number 185 in the Cooper Basin.

Mining

Vulcan merger Vulcan Resources and Universal Resources have agreed to merge. Vulcan shareholders will receive 6.85 Universal shares for each Vulcan share. The merged group intends to advance a copper, cobalt and nickel project in eastern Finland and a copper project in Queensland.