Executive Summary: October 22, 2009
By Scott Rochfort | smh.com.au | 22 October
Freedom flyers . . . Qantas honchos Leigh Clifford and Alan Joyce. illustration: By Shakespeare
CBD
Sydney up on the valuation runway
The newly internalised management team of MAp Airports will no doubt be again running the ruler over their valuation of Sydney Airport following the sale of London's Gatwick Airport.
Ferrovial, the Spanish owner of Gatwick, announced yesterday its BAA subsidiary had flogged the airport for £1.51 billion ($2.7 billion) to the Credit Suisse and General Electric-backed Global Infrastructure Partners.
This was slightly below the "regulated asset base" valuation for Britain's second-busiest airport, which carried 34 million passengers last year. Heathrow, in comparison, has a RAB valuation of £10 billion and carried 67 million passengers last year.
Sydney Airport, which carried 32.9 million passengers last year, has an asset value of $7.4 billion according to its latest full-year accounts.
Out of Perpetual
Perpetual's head of global equities, Emilio "Speedy" Gonzalez, has jumped ship to take up the job as BT Investment Management's new chief executive.
"What attracted me to BTIM is its focus on investment management, the high quality of its people, brand and its recognised professional culture," explained Gonzalez, who will take up the role in January.
Obviously it had nothing to do with money. Gonzalez will be paid a base package of $600,000, $2.3 million in unvested BTIM shares and a "variable reward" of up to $1.8 million a year.
The Perpetual veteran of 19 years collected $2.1 million last financial year, making him the highest paid executive mentioned in this year's annual report.
Gonzalez will take up the position vacated by Dirk Morris, who quit with little warning in June. Since then, BTIM's chairman, Brian Scullin, has been running things.
Morris got about 40 per cent less base pay than what his replacement Gonzalez will get.
Right flights
The Qantas chairman, Leigh Clifford, showed the airline's shareholders yesterday that he does have a humanitarian side after all.
When taken to task by one do-gooder over why the Qantas part-owned Jetstar Asia had flights into the former Burmese capital, Rangoon, Clifford explained his airline was actually helping the downtrodden masses of the pariah state.
"The last thing we want is the people of Burma to be disadvantaged," he said, noting Australia and the US had recently adopted policies of engagement with the state.
Qantas's chief executive, Alan Joyce, chipped in that Jetstar provided much needed access for charity and aid workers into the military-controlled state.
"The advice we are getting from people like [World Vision's] Tim Costello is that it is the right way to go," Joyce said. Costello, who had a recent phone hook-up with Joyce over the issue, later told CBD he considered airline flights, even into Burma, an "essential service".
World Vision, he said, had 800 staff in Burma and had the blessing of the imprisoned pro-democracy campaigner Aung Sang Su Kyi to continue its work in the country.
Let's hope Jetstar Asia is not carrying too many members of the military regime on their shopping holidays to Singapore.
The former head of Australia's military and Qantas director General Peter Cosgrove, meanwhile, was asked for his thoughts on what would have happened to the Flying Roo had the debt-fuelled Macquarie-led private equity bid succeeded two years ago.
He didn't get a chance to answer. Clifford, who came onboard after the collapse of the planned buy-out, responded: "That is behind us. We would like to go forward."
Busy banker
Merrill Lynch's former top Australian investment banker, Geoff Brunsdon, seems to enjoy a challenge.
Four months since leaving the Bank of America subsidiary, Brunsdon has been enticed to take up a non-executive board position at the funds management arm of the struggling APN Property Group.
+It's the same fund manager that thought it would be a bright idea to buy a swag of overvalued shopping centres in Romania and Greece for its listed APN European Retail arm, of which Brunsdon has also become a director.
He will sit on the APN funds management board with his old chum (from ING) and APN's managing director, David Blight. Brunsdon also chairs the charity Redkite and is a director of an environmental lobby group for scientists, the Wentworth Group.
Let's hope he considers APN European Retail – whose shares have slumped 93 per cent – more than just a charity case. Brunsdon's appointment to APN comes just a day after the scrap metal recycler Sims Metal Management put the former banker up for election to its board. It seems his passion for saving the planet also includes recycling.
Aside from helping Sims out with its 1991 listing, Brunsdon has already served as a non-executive with the group between 1999 and 2007.
He left when Sims merged with the largest metal recycler in the US, Metal Management.
Pub trouble
The Wollongong publican who hit the headlines when he was accused of telling one of his ageing barmaids that he wanted to replace her with "young glamours" has also hit financial trouble, losing his four pubs to a receiver.
The National Australia Bank has appointed the receiver McGrathNicol to David Wakeford's pub empire after it defaulted on loans worth about $15 million.
They include the Charles Hotel at Fairy Meadow near Wollongong, the Royal Mail in the country town of Braidwood, just outside of Canberra, and two in Port Kembla - the Steelworks Hotel and the Port Kembla Hotel. Wakeford, 64, once owned all the pubs in Port Kembla, having recently sold the Commercial Hotel.
The Charles Hotel offers "lingerie waitresses" on Thursday and Friday afternoons. Wakeford came to prominence two years ago when he was sued for sexual discrimination by a 37-year-old former barmaid who claimed she had her hours cut because she was getting old.
Wakeford successfully defended the case, arguing he had cut her hours because the pub was under financial pressure.
The four hotels were owned by the creatively named Big Bert Pty Ltd. The McGrathNicol partner Joseph Hayes was appointed to the company by the bank on Friday.
He said the hotels were "trading satisfactorily" and he would put them on the market shortly.
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Insider
By Miriam Steffens
Plenty of balls in the NSW barrel
The State Government is one step closer to cashing in on the NSW Lotteries sale.
With expressions of interest due two days ago, the obvious candidates, Tatts Group and Tabcorp, are both believed to have submitted documents, along with the Newsagents Association of NSW & ACT and a swag of domestic and international gaming operators.
Goldman Sachs JBWere, which is managing the process, remained stumm on the identity of the interested parties yesterday. It has 10 busy days ahead of it, having to whittle down all the submissions to a workable short list of candidates.
A data room is expected to be opened early next month to allow potential bidders to conduct due diligence and get management presentations.
At the same time the Government will do some due diligence of its own with probity checks of everyone involved. The sale is earmarked to be finished by March.
National odds
The Productivity Commission's draft report on gambling, published yesterday, makes for some mixed reading for the wagering industry.
The Federal Government's economic adviser seems to have heeded the calls of the big players Tabcorp and Tatts Group to regulate wagering nationally and ditch the conundrum of state rules.
One key element would be a single levy, set by an independent body, that would create a level playing field and replace all other product fees paid for by wagering operators to the racing industry.
Totalisators such as Tabcorp have been complaining that online operators such as Betfair and corporate bookmakers from the Northern Territory, where taxes and product fees are low, are stomping on their home turf and luring away customers with cheaper prices.
But rather than backing their case for fees based on turnover – or the total value of bets placed – the commission is promoting a gross profit model that excludes winnings paid to punters.
A 1.5 per cent turnover levy would cost the TABs less than 10 per cent of gross profit, compared with 25 per cent for corporate bookmakers and 33 per cent for Betfair because of their lower take-out rates, putting the cheaper operators at a disadvantage, the report argues.
There was more unpleasant reading for Tabcorp. The commission reckons the Australian Competition and Consumer Commission should investigate "any adverse implications" from the company's ownership of Sky Channel because it could "frustrate competitive access to racing broadcasts".
Sky is the dominant TV broadcaster of thoroughbred races in pubs and clubs. No doubt, the industry will have a word or two to say in its responding submissions, due by mid-December.
The commission's final report will be tabled by the end of February.
China contacts
The links by Deutsche Bank's Australian arm to China seem to be reaping dividends of late. Deutsche's mining investment banking team has represented the Chinese side in Hunan Valin's investment in Fortescue Metals, Baosteel's proposed investment in Aquila Resources, and in the recent failed deal for Chinese lenders to provide Fortescue with a $US6 billion ($6.4 billion) debt package.
Now its experience with Chinese financiers has prompted Sundance Resources to employ it on the other side, as adviser in its quest to obtain funds to build its $US3.3 billion Mbalam iron ore project in Cameroon.
One convenient aspect in this is that the Foreign Investment Review Board would look pretty silly if it forbade a Chinese company from investing in a project outside Australia.
Sundance is said to be seeking a similar structure for its project to that used by the West Australian iron ore hopeful Gindalbie Metals. Under the Gindalbie model, Sundance would sell up to 50 per cent of the Mbalam project and issue shares in a placement to its new Chinese partner.
Furthermore, Gindalbie's partner, Ansteel, is responsible for arranging the debt portion of the $1.8 billion Karara magnetite project with Chinese lenders.
Sundance is understood to be hopeful of picking a partner towards the start of next year, well before its feasibility study is due to be completed – in the third quarter.
Briefs
Share schemes
Tax deferral curbed Tax on employee share scheme benefits may not be deferred beyond the end of a person's employment under the Government's revised plan to tighten taxation of the schemes. John Fauvet, a partner at PricewaterhouseCoopers, said the bill, introduced yesterday, "encourages behaviour which is not in shareholders' best interest, such as accelerated vesting".
Super
Strong gains Australian superannuation funds have continued to post strong gains in the past three months, in effect returning investments to pre-financial crisis levels, research shows. SuperRatings said the average balanced super fund gained 9.27 per cent in the three months to September, taking growth since March to just over 17 per cent.
Uranium
WAlease granted Western Australia's first uranium mine is one step closer to reality after a mining lease was granted to the Canadian company Mega Uranium for its Lake Maitland project, near Wiluna in the state's eastern goldfields region.
Property
Offer rejected The independent directors of the Multiplex Prime Property Fund have rejected an alternative offer from the Grocon-Oaktree consortium. Fund manager Lawrence Wong said Brookfield Multiplex's entitlement offer and cash-out facility was in the best interest of unitholders and "no superior offer is presently available".
Housing
Resimac issue The non-bank lender Resimac has sold $290 million of securities backed by residential mortgages. The Federal Government took up $56.4 million of them. The Treasurer, Wayne Swan, said last week the Government might double its investment in residential mortgage-backed securities to $16 billion to promote competition in the home loan market.
Vehicles
Sales increase New motor vehicle sales rose by 2.9 per cent, seasonally adjusted, to 77,744 last month, from 75,530 in August, the Bureau of Statistics said.
First published by Smh.com.au on October 22 2009
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