if new bids confirmed, page-13

RAIDERS BATTLE FOR STELLA GROUP
COURIER MAIL
Anthony Marx and Josh Robertson

January 31, 2008 11:00pm

CORPORATE raiders Private Equity Partners and US-based Kohlberg Kravis Roberts are understood to have joined the bidding war for the Stella Group of accommodation and travel assets, which MFS is desperately trying to unload to avert disaster.
Sources said yesterday the two leading private equity players had each offered more than $1.8 billion for a half share in the group, which includes BreakFree resorts, Peppers hotels and Harvey World Travel.

Both offers are superior to the $1.6 billion CVC Asia Pacific is understood to have put up and had rejected as too low, since MFS had cobbled together the assets over time at a cost of about $1.9 billion.

Ironically, CVC is believed to have been willing to pay $2.2 billion last year but that offer too was knocked back because MFS valued the group then at $2.4 billion, sources said.

More details have also emerged about the precarious financial position of former chief executive Michael King and former director Phil Adams, who both founded the company nine years ago.

The men, who collectively control more than 63 million shares once valued as high as $400 million, "will be in a margin call position if the shares come back on at less than $2," a source said.

The stock is now frozen at 99¢ indefinitely, having fallen from a high of $6.45 last year.

It crashed last month after swift negative reaction to an aborted $550 million capital raising to restructure the company.

An announcement on the Stella sale was expected as early as today but will now probably delayed for several weeks.

MFS chief executive Craig White said yesterday that "discussions were progressing well" and money from the sale would be used to recapitalise and repay short-term debt, estimated at $220 million of the $1.7 billion owed by the company.

Meanwhile, MFS recouped almost $100 million by selling its interest in a joint venture with Gold Coast-based Domain Aged Care Group.

MFS acquired its stake, in the form of options and a security interest, in December 2006 by agreeing to a $50 million loan to Domain.

It said the sale of that stake to AMP, effective from the end of this month, would net about $43.5 million profit. Domain reportedly repaid the $50 million loan yesterday, plus about $6 million in interest and fees.

MFS also announced plans yesterday to change its name and the name of several funds by April Fool's Day, pending shareholder approval.

Company spokesman John Hurst said no name had been chosen but an agreement with US company Massachusetts Financial Services meant MFS had to change its name anyway. Property developer MFS Diversified and tourism entity MFS Living will be rebadged.