Executive Summary: November 16, 2009
By Scott Rochfort | smh.com.au | 16 November
Join the queue . . . Mark Rowsthorn's Asciano is feeling the strain. Illustration: John Shakespeare.
CBD
Lots of wear and tear down at the waterfront
The Asciano Group completed a capital raising of $2.35 billion recently, yet things there are still getting rusty and worn out.
The company's Patrick stevedoring businesshas temporarily decommissioned its five giant rail-mounted gantries, used to load shipping containerson to railcars at its Port Botany docks, because of "wheel-wear issues".
"We're doing a full analysis of the issue with the designers of the product," said an Asciano spokeswoman, Marie Festa.
A waterfront deepthroat told CBD the company was simply trying to save a few bucks by refusing to fix a few broken wheels and sunken rail tracks.
Festa said the reach stackers (portable cranes) now used to load trains entering the terminal were proving just as effective as the equipment Patrick spent tens of millions of dollars installing when Chris Corrigan ran the company.
Asciano said the gantry problems were not related to the massive truck queues into the port, for which it has already copped a slap over the wrist from the NSW Government. One wonders if Asciano is still trying to conserve cash.
Asciano has already backed off from installing its once celebrated AutoStrad software – used to do away with more humanoids on its docks – in Sydney and Melbourne.
Still, Asciano's cash-saving efforts and huge loss last financial year did not stop it from paying bonuses to some of its senior executives, including its chief, Mark Rowsthorn.
He at least appeared to be speaking from the heart when he complained about the competition watchdog last week.
He argued how an Australian Competition and Consumer Commission report confirmed "stevedores in Australia do not have an incentive to invest".
At heart was Rowthorn's concern over the regulator's excitement about a third stevedore coming into the market to take on Asciano and the Dubai royal family-owned DP World.
"The incentive to invest for existing stevedores has reduced significantly in light of the decisions made by port corporations to invest in capacity well ahead of demand," Rowsthorn said. Let's just hope the wheels are not falling off at Asciano.
Not so devoted
The dazzling world of entrepreneurialism can be fickle. Two months ago Mitch Barnes proclaimed his devotion to the host of Channel Nine's The Apprentice.
Barnes, the creator of markbouris.com, has put the fan website up for sale. "I have enjoyed running this website over the past few months, however times are tough financially and I have decided to sell this website," Barnes said.
In September Barnes told CBD that he set up the site after auditioning to get on the show as a contestant but failing.
"I think that Mark [Bouris] is an amazingly skilled businessman who's been able to propel himself from the working-class Sydney suburb of Punchbowl to be one of Australia's most successful entrepreneurs," Barnes said at the time.
At least Barnes is showing some entrepreneurial flair by trying a quick sale of the site.
Keen investors
The resurgent job market is not the only thing keeping a smile on the face of Seek.com's joint chief executive, Paul Bassat.
He disclosed on Friday that he had cashed in 787,500 options (priced at $2.10) at a $3.2 million profit.
This should help complement the $844,590 Bassat pocketed in remuneration last financial year and the $1.26 million final dividend cheque he banked last month.
In May Bassat bought $3.9 million worth of shares at $2.60 a pop in a capital raising, and these have more than doubled in value.
His stake in the job hunting website is now worth more than $75 million. Bassat's older brother and fellow Seek co-managing chief executive, Andrew Bassat, is yet to exercise his 787,500 options (also priced at $2.10).
These options expire in 2011. The Bassat boys have another batch of 863,085 options each (priced at $5.29) that are due to expire in 2013. They are already in the money.
Tangled webs
David Anderson, founder of Business Puzzle Solutions and company secretary of the collapsed Gold Coast financial concern Octaviar, appears to be a gun for hire.
Bentleys Corporate Recovery, the new liquidator of Octaviar (aka MSF), will terminate the services of Business Puzzle Solutions from Wednesday.
Anderson set up the firm last year to help the former administrator and liquidator Deloitte untangle the financial mess that was MFS.
The former chief financial officer of MFS saw his firm get paid $940,000 in "consultancy fees" from Deloitte in less than a year.
Bentleys is yet to disclose how much extra was paid to Business Puzzle after it took charge.
The fees compare with the $532,133 base salary Anderson pocketed in his last full year as chief financial officer at MFS, before things went pear shaped. Bentleys served Anderson his notice when they replaced Deloitte in September.
It is believed Anderson was also restricted by Bentleys to only being allowed to visit the office during working hours.
Anderson will probably not be around to answer questions when the next Octaviar creditors' meeting is held next month.
The company has more than $1.7 billion of outstanding bills.
Air buddies
The boss of Emirates, Tim Clark, has heaped praise on one Virgin Blue director for not being fooledby the propaganda about Middle Eastern carriers.
In a speech to the European Aviation Club last week, Clark noted how some airlines in the past (ahem, Qantas) had tried to scaremonger politicians into the evils of oil-drenched Middle Eastern carriers, which were seeking greater access into certain countries.
"We guess their aim was to hopefully slow us down, buy them time and make their governments suspicious," Clark said.
"A former Australian transport minister once said it was a clever trick but one he will never fall for."
While he did not name the minister, it might be a fair guess it was the former Howard Government transport minister and now a Virgin Blue director, Mark Vaile.
Vaile was the minister who in 2007 granted Emirates permission to double its flights into Australia.
Got a tip? email srochfort@smh.com.au
Insider
By Jamie Freed
Price rules in private equity refloats
Now that Kathmandu has floated successfully – as opposed to the lacklustre Myer performance and the failure of the Investa offering – private equity groups with retail assets are not likely to shy away from plans for upcoming listings.
Archer Capital's Ascendia Retail, which owns the Rebel Sport chain, has already picked out advisers for an offering expected early next year.
And there is plenty of speculation that the bookseller Redgroup Retail, owned by Pacific Equity Partners, could be gearing up for a $600 million or so float.
Redgroup, the owner of the Borders and Angus & Robertson chains, has bonds that trade on the New Zealand stock exchange.
Since the start of October the yield on the debt has fallen from 25 per cent to 17.5 per cent as investors bet the debt, due to expire next December, will be retired as part of a public listing.
On Friday the bonds were being offered at just above the $100 face value; buyers were seeking to pay $94.435.
Myer used the proceeds from its float to retire listed notes. The relative success of the Kathmandu float compared with Myer was attributed primarily to the lower earnings multiple at which it was priced.
Also, Kathmandu was marketed to small cap fund managers that were happy to bid "low and hard" – for a lot of stock at the lower end of the range – because they saw it as a good growth story.
It isn't only in Australia where pricing has proven critical to the success or otherwise of the latest private equity offerings.
The legendary private equity group KKR was forced last week to price its $US716 million public offering of a discount store, Dollar Mart, at the very bottom of its bookbuild range, which was still nearly twice the earnings multiple of Wal-Mart.
Bloomberg data shows US floats this calendar year have outperformed the benchmark S&P 500 index by only 0.1 per cent in the initial month of trading, which is the lowest margin in at least 14 years.
And within the last three weeks three offerings have been pulled in the US, two of them by private equity groups.
Value slashed
It appears that Elders' recent admission that it would take until early next year – rather than sometime this year – for it and partner AWB to offload the Hi-Fert fertiliser joint venture is not the only difficulty the pair have faced in selling that asset.
At the time of its recent recapitalisation Elders signalled it was fairly confident of receiving at least the $69 million book value for its share.
Soon afterward, AWB completed its own recapitalisation, where it said “strong expressions of interest” had been received for the fertiliser venture, even though the division was expected to report an operating loss of $18 million to $20 million in light of the tough market for the product.
A few weeks ago Elders revealed sales talks had been whittled down to one party, believed to be a Chinese group. But it seems the price being discussed is no longer in the ballpark of the $138 million suggested by Elders' book valuation.
On Friday evening AWB told the market it had written down its share of Hi-Fert by a whopping $43 million to just $11 million (which also indicates Elders had a more optimistic valuation on its books previously).
Soon afterwards, Elders slashed the value of its stake in the joint venture by $57 million to $10.6 million, calling the new valuation a “conservative approach”.
Both companies had planned to use the proceeds to repay debt, so clearly the market will have to readjust expectations about their balance sheets.
Elders is also trying to sell ITC Timber to Gunns for $100 million, but has yet to receive final approval from the competition regulator.
Tollway links
It has been more than a week since Transurban admitted it had received an unsolicited takeover bid from two Canadian pension funds, but there has been very little news since.
However, the stand-off between the two sides has renewed focus on one of Transurban's rivals, ConnectEast Group.
Transurban has long been considered the natural owner of ConnectEast's Eastlink tollway due to the cost savings available from combining the companies, but continuing financing and legal issues with ConnectEast have made an acquisition unpalatable so far.
But that could change if Canada Pension Plan Investment Board and Ontario Teachers' Pension Plan are able to convince Transurban to support a scheme of arrangement.
As part of the scheme, the Canadians want to convince Transurban's largest shareholder, CP2, that it should vend its 14.5 per cent stake into an unlisted vehicle after the deal is completed.
CP2 just happens to own a 30 per cent stake in ConnectEast. However, UBS thinks it is unlikely that CP2 has the financial capacity to fund a bid for the remainder of that company.
Instead, it could use that stake as a bargaining chip with the Canadian pension funds to be vended into a privatised Transurban.
Tiddlers
Most of the recent focus on floats has naturally been on the big end of the market, but there have also been several small offerings in the mining and exploration sector of late.
Laconia Resources, a West Australian gold float put together by a Sydney corporate adviser, Emerald Partners, and backed by a prominent group of mining investors, is trading 15 per cent above its 20c issue price after listing a month ago.
And now many of the same backers – including Hardman Resources founder Ted Ellyard, former OZ Minerals director Ronnie Beevor and WA prospector Denis O'Meara – are supporting the float of a base metals hopeful, Rubianna Resources.
The $6 million offer officially opens tomorrow, but after strong interest from the private client divisions of major brokers during pre-marketing last week, there is said to be little if any remaining stock available.
Rubianna's main interest is the Ruby Well project in Western Australia, which is 70 kilometres away from Sandfire Resources's high-grade Doolgunna copper-gold project that mining industry types rank as one of the most exciting discoveries in recent memory.
Rubianna's offer of 30 million shares at 20c closes on November 24, and it is expected to list on December 7.
jfreed@smh.com.au
Business Briefs
Infrastructure
BrisCon backs off The chief executive of BrisConnections Unit Trusts, Ray Wilson, says it has dropped efforts to force unitholders to pay outstanding instalments. "All of those previous actions have stopped, or are in the process of stopping," Mr Wilson told Sky Business on Sunday.
Banking
ANZ hiring ANZ plans to hire as many as 200 staff in Singapore in the next nine months, the Business Times reported. The bank employs 700 staff in Singapore and will get 660 more after it integrates businesses bought from the Royal Bank of Scotland.
Media
Vivendi mulls sale Vivendi, owner of the world's biggest music company, may decide as soon as today to sell its 20 per cent stake in NBC Universal, paving the way for General Electric and Comcast to combine their media assets.
Retailing
Kathmandu bullish The market debutante Kathmandu predicts a strong Christmas period for its outdoor gear as people "go back to basics" following the economic slowdown.
First published by Smh.com.au on November 16 2009
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