Executive Summary: November 03, 2009
By Scott Rochfort | smh.com.au | 03 November
Steve Keen and RoryRobertson ... still arguing about peaks and descents
CBD
On the road to Kosciuszko
Australia's chief doomsday economist, Steve Keen, is preparing for his ascent of Mount Kosciuszko after conceding defeat (well, partly anyway) in his gamble over house prices with the Macquarie economist Rory Robertson.
The release of official data yesterday showing housing prices reaching a new peak led Keen to concede defeat in his prediction that prices would tank by the end of 2009.
But if you thought the loss of the bet would keep Keen quiet, you were wrong. "I will try and make it a real media circus," he said.
Keen said he hoped to scale the nation's highest hill next April. He plans to use the 220-kilometre walk from Canberra to generate awareness of the environmental degradation of the Snowy Mountains.
He will also be required to wear a T-shirt saying: "I was hopelessly wrong on house prices. Ask me how." But the University of Western associate professor warned that Rory Robertson had better keep fit for the next 15 years.
He argued the bet was still alive, given he had originally argued house prices would ultimately fall 40 per cent from their all-time high within the next 15 years.
Keen said he would have no problem scaling the peak, noting he regularly ran half-marathons. Robertson noted that Keen's tip went awry soon after he sold his Surry Hills pad last year. "Home prices started rising about five minutes after he sold his apartment," he told CBD.
However, being a good sport, Robertson has agreed to alter the bet. "For fun, if Australian house prices fall by 40 per cent from any future peak in my lifetime, I will follow in Dr Keen's footsteps," he said in a later email.
"Similarly, if Dr Keen proves the existence of the Loch Ness Monster, I will take the walk."
Keen also proved his doomsday credentials yesterday by predicting that one of the Melbourne Cup favourites, Alcopop, would vie with the roughie Spin Around for the wooden spoon.
"I'll go for Roman Emperor to be pipped at the post by Changing of the Guard, with Crime Scene in hot pursuit," Keen tipped. Robertson declined to provide any tips. "My winner already is home and hosed," he said.
Pipeline litter
Origin Energy's increased stake in the offshore Otway gas project should help the company bypass some of the conflicts it faces on dry land.
On Friday Origin's chairman, Kevin "Harry" McCann, copped some heated questions from a Queensland farmer whose land was crossed by one of the company's pipelines.
The farmer claimed at the Origin annual meeting that workers sent by the company had left some interesting relics behind. "Human faeces and toilet paper, pornographic writing on roadsides, and we've got 12 and 14 year-old granddaughters," he told the meeting.
"Cannabis bongs, the men tell me – I'm not up with cannabis."
My shares
The former executive chairman of Myer Holdings, Bill "Moa" Wavish, is now arguably the most well-off amateur palaeontologist in Australia.
Bill showed his loyalty towards the department store chain by offloading nearly half of his 11.77 million shares into the float, pocketing about $23 million.
Wonder if Bill, who is a director of the Age of Dinosaurs museum in Winton, Queensland, is happy that he is not bound by the escrow conditions applying to Myer's senior management.
Myer boss, Bernie Brookes, can only sell 25 per cent of his 11.77 million shares (which were worth $4 million less by the close of trading yesterday) over the next 18 months.
Ideal world
Sadly, some of Goldman Sachs JBWere's senior Melbourne operatives will be unable to splash the millions of dollars of fees made from the Myer float at Flemington racecourse on today's Melbourne Cup.
After having had a flutter at the Myer tent for Saturday's Derby Day, the House of Were's co-head of investment banking, Christian Johnston, will jet into Sydney today to help host a lunch for Rupert Murdoch.
The media mogul, who arrived in the News Corp outpost last Friday, will also present News Corp's first quarter results from Australia this week, where he might offer more details on how he plans to start charging for content on his websites.
The most read story on the London Sun website yesterday was about a plastic surgeon who "chose a dowdy girl as his bride - so he could sculpt her into his ideal wife".
Apart from performing eight operations on his wife's thighs, eyes and face, the plastic surgeon pumped 1.6 kilograms "of silicone into her body, boosting her size A chest to a giant F cup".
Hanging in
Drillsearch's former executive director Peter Simpson has continued to hold his ground.
Three weeks out from a shareholder vote that is most likely to eject Simpson from the board of the Canadian explorer Circumpacific, 79.5 per cent owned by Drillsearch, he said: "The board won't be browbeaten into resigning early at the whim of one shareholder to suit its own commercial objectives."
Five months after being ousted from Drillsearch's board but managing to stay on as chief executive at Circumpacific, Simpson seems unfussed about the dominant shareholder.
In an email to CBD, Simpson questioned why Drillsearch wanted to get rid of him and two other directors appointed by him before he was booted from the Drillsearch board.
“We found it puzzling." Simpson also said he was not fazed by negative press coverage in Australia, noting he had "not been targeted in Canada, the home of Circumpacific and [20.5 per cent of] its shareholders".
Maybe the Canadian media is not interested in covering a company with a market value of about $7 million.
Simpson, who gets his surname from the whitegoods dynasty, also corrected a CBD report that said he had "adopted his middle name, Penfold, from the famous wine-making family".
"I have had my family name 'Penfold' since birth, being from my mother's side, and the suggestion by you or Drillsearch that I adopted that name is spineless and reflects a lack of basic research or inquiry by Fairfax," he said.
Got a tip? email srochfort@smh.com.au
Insider
By Jamie Freed
Big Australian still set to go to Rio
For all of the recent talk in the market about the possibility of Rio Tinto abandoning its proposed iron ore joint venture with BHP Billiton, Rio's management team yesterday could not have made it clearer to investors and analysts that it was committed to the deal.
"I think they were emphatic [about sticking to the deal]," one fund manager told Insider after Rio's investor presentation and lunch in Sydney yesterday.
"I was left in no doubt." During the presentation, Rio boss Tom Albanese said the joint venture could deliver $US10 billion ($11 billion) or more in cost savings, which were "without peer" in the mining sector.
Rio and BHP have been talking about a transaction like this on and off since 1998, so it is hardly a revolutionary idea for the management team.
Rio has also quietly been putting infrastructure in place to ensure the combination goes smoothly.
Apparently, its remote operations centre in Perth already has provisions in place to add BHP's mines to the mix. Rio and BHP are now focused on getting the minor details right, because the joint venture agreement will be in place for decades.
They expect to have a binding contract nutted out by the end of the year and have already made preliminary approaches to all of the relevant regulators.
They are unable to conduct full due diligence on each other's operations until the deal is given the green light and there is some expectation the cost savings target is therefore likely to rise.
Rio will receive an equalisation payment of about $US5.8 billion from BHP as part of the deal because it has larger iron ore operations than BHP and the joint venture will be owned 50/50 between the pair.
But in the meantime, Rio is continuing with other asset sales. It is no secret that it wants to rid itself of the remainder of Alcan's packaging and engineered products divisions.
But the fate of some of the smaller mining assets it had initially placed on the market in late 2007 had been less clear until yesterday.
Rio said it was still looking to sell its Northparkes copper-gold mine in NSW after failing to do so last year.
It is also looking to offload its Sweetwater uranium mill in the US, which was nearly sold to Uranium One a few years back. Macquarie Capital has been in charge of the Northparkes sales process, which was placed on hold during the global financial crisis.
OZ Minerals is one possible buyer for the mine, said to be worth between about $500 million and $1 billion. OZ is sitting on plenty of cash and had a very close look under its previous management, whereas Newcrest Mining has previously ruled out buying the mine.
Pac's Knockback
It will be worth watching whether investors in Energy Developments are satisfied with the board's decision to reject a $2.65 a share proposal from Pacific Equity Partners now that an independent expert has placed a much higher valuation on the company.
After all, it was the major shareholders themselves – including New Zealand's Infratil with a 33 per cent stake – which last year encouraged Energy Developments to put itself up for sale.
So far, it doesn't appear that Infratil and other major investors like BT Investment and Ausbil Dexia have been beating down the doors to force the board to accept the Pacific Equity Partners proposal.
In that context the Energy board would be happy to return to running the business on an ongoing basis rather than continuing to have the distraction of takeover talks.
However, shareholder opinions may be more fully enunciated at Energy's annual meeting in Brisbane on Thursday.
Pacific has not traditionally made hostile bids, so its strategy is likely to involve sitting back and letting investors decide whether to place pressure on the board.
If its proposal finds little traction now, Pacific can sit back and observe the company's performance over the coming months, just as Allco Equity Partners did with Veda Advantage before making a second, successful offer in 2007.
Lonergan Edwards has valued Energy Developments at $3.17 to $4.09 a share, while broker price targets range from $2.53 to $3.30.
Its shares closed 8c lower at $2.32.
Mixed drinks
Investors in Foster's Group will be keeping a closer eye on the proposed plan for Constellation Brands and Australian Vintage to combine some of their assets into a new Australian-listed vehicle.
Constellation expects to have a substantial, but not controlling stake in the joint venture, into which it would fold some of its Australian and European operations.
Goldman Sachs JBWere said the structure could offer a helpful solution to some of its Australian Vintage debt issues.
Australian Vintage only has a market value of $44 million, so it would be interesting to see how the market would value the new vehicle.
The fact it would be a listed vehicle means Constellation could make a full exit at a later date.
It would also be possible for Foster's to sell some of its own unwanted wine assets into this new company in return for cash or scrip at some point.
Interestingly, Foster's shares rose 1c to $5.50 yesterday in a down day for the market.
The talks between Constellation and Australian Vintage remain at an early stage, but the parties felt enough staff members were aware of the discussions that it was prudent to make the market aware of the situation.
Constellation could provide more insight at an investor briefing on November 11.
jfreed@smh.com.au
Business Briefs
Hardware
Danks takeover Danks says it is closer to being taken over by a hardware joint venture between Woolworths and Lowes after the minimum acceptance conditions were met. The next hurdle will be approval from the Australian Competition and Consumer Commission. A decision is expected next week.
Publishing
Fee for online West Australian Newspapers may consider following News Corp down the path of charging for online news content, its chairman, Kerry Stokes, told the company's annual meeting.
Banking
Liddy's rewards Bank of Queensland's managing director, David Liddy, earned $2.23 million in 2009, up from $1.19 million the previous year, according to the annual report. The bank's cash earnings for the 12 months to August 31 were $187.4 million, up 21 per cent.
Cosmetics
Staying young Biotech company Phosphagenics announced that the luxury beauty company, Le Metier de Beaute, of New York, will launch its cosmetic treatment products, Peau de Vierge Anti-Aging Collection, exclusively with Phosphagenics' TPM delivery technology across the US this month.
Property
No Multiplex deal The Grocon-Oaktree consortium will walk away from the battle for control of the Multiplex Prime Property Fund. Investors will now vote on the refinancing offer by Multiplex's management. The fund needs cash before November 16 to repay bankers or risk breaking debt covenants.
Tax liability
Kiwi kerfuffle Westpac New Zealand has been accused of issuing an almost meaningless set of financial statements for the year to September. If its $NZ918 million tax liability awarded by a court was included in the retail business, said banking expert David Tripe, it would have posted a $NZ682 million loss for the year.
First published by Smh.com.au on November 03 2009
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