PRESS DIGEST: Australian Business News Aug 1 06:56, Wednesday, August 01, 2007
(Compiled for Reuters by Media Monitors)
THE AUSTRALIAN FINANCIAL REVIEW (www.afr.com)
Travel agency franchise, Flight Centre , abandoned a A$1.65 billion buyout proposal following independent advice from Ernst & Young, which valued Flight Centre at nearly A$2 billion. The plan would have seen the operational assets spun into a leveraged joint venture with Pacific Equity Partners, which would have taken a 30 percent stake. Flight Centre chairman, Bruce Brown, said the disparity in valuations meant a 'highly complex and costly transaction' would have crimped shareholder returns. Page 53.
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Insiders reveal that the controlling shareholders in Dow Jones & Co will support News Corp's US$5 billion takeover of the publishing group. Members of the Bancroft family and their various trusts control 64 percent of Dow Jones' shareholder vote, and most have swung behind Rupert Murdoch's proposal. The dissenters want Dow Jones to create a US$30 million fund for legal and advisory fees incurred by the family, and News Corp to assume these liabilities. Dow Jones' prized asset is the Wall Street Journal publication. Page 53.
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Macquarie Bank-AMP fund, DUET Group, could thwart the A$8 billion takeover of Alinta by exercising its pre-emptive right to buy one of Alinta's key assets, Melbourne-based United Energy Distribution. DUET, which holds controlling stakes in United Energy and Alinta's Dampier-to-Bunbury gas pipeline, does not intend to hand over these assets. Alinta shareholders will vote on the Babc*ck & Brown-Singapore Power takeover in a fortnight. Page 54.
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Singapore's CitySpring Infrastructure Management has made its maiden investment in Australia, buying the Basslink electricity cable from British group, National Grid, in a A$1.2 billion deal. The Basslink cable, built for A$780 million, delivers power from the mainland to Tasmania and allows the state to export surplus hydro and wind power. Hydro Tasmania, Australia's biggest hydropower producer with a 25-year contract to use the Basslink cable, yesterday welcomed the sale, as did the Tasmanian Government. Page 55.
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THE AUSTRALIAN (www.theaustralian.news.com.au)
Two Macquarie Bank funds could lose a quarter of their value due to 'price volatility' in the United States senior loans market, the bank warned yesterday. Macquarie Fortress Investments director, Peter Lucas, said the fallout from the sub-prime mortgage crisis had created 'supply demand unbalances' in the broader loans market. While the listed Macquarie Fortress Notes and the unlisted Macquarie Fortress Fund do not have any direct exposure to US sub-prime mortgages, both are highly leveraged. Page 31.
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Publishing & Broadcasting Ltd. aims to raise A$290 million from a bond issue to fund a share buyback for Melco PBL Entertainment, its Nasdaq-listed gaming joint-venture. Melco PBL's shareprice has fallen from US$19 in December to US$12.90 following cost overruns on two Macau casinos and the delayed purchase of a third site. A crackdown by Chinese authorities on visitor visas to Macau has also caused concern. On the Australian Stock Exchange, PBL shares closed yesterday at A$18.52, down from A$22 in March. Page 31.
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New South Wales miner, Coal & Allied , has recorded a A$24 million fall in annual profit despite higher coal prices. Export bottlenecks, recent floods and the higher Australian dollar were blamed for the result, although managing director, Doug Ritchie, was mostly concerned about the shipping delays. He warned that Asian coal buyers were increasingly looking to South Africa, Indonesia and Canada in the face of infrastructure bottlenecks in NSW. Mr Ritchie called on the State Government to lighten regulation at ports. Page 31.
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Federal Resources Minister, Ian Macfarlane, has awarded China National Offshore Oil Corp (CNOOC) an exploration permit for the Bonaparte Basin off Darwin. CNOOC, China's biggest offshore oil producer, already has a stake in the North West Shelf gas project, which has a A$25 billion, 25-year contract to supply Guangdong province with natural gas. Hess of the United States, India's Reliance Industries and France's Total were also awarded offshore licences. Page 32.
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THE SYDNEY MORNING HERALD (www.smh.com.au)
The corporate regulator says it would be 'prejudicial' to name the targets of its high-risk investments probe. The Australian Securities and Investments Commission has identified 83 debenture-note issuers with about A$8 billion of investors' funds that it believes to be vulnerable. It is considering a number of measures to protect investors, including rating existing issues and placing warnings on advertisements. Investors have lost about A$800 million with the recent demise of Westpoint, Fincorp and two other property financiers. Page 21.
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Insiders say Telstra's ongoing criticism of federal regulation and its push to win a Government high-speed broadband contract have distracted observers from its real motive -to upgrade its cable network. Yesterday, chief executive, Sol Trujillo, indicated Telstra was working on alternatives to a fibre-to-the-node network, such as improving broadband speeds for its Foxtel cable. The cable could eventually provide speeds of between 50 and 100 megabits per second to 2.7 million metropolitan homes. Page 21.
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Macquarie Bank's leisure trust has made its first foray into the health and fitness market, outlaying A$60 million for Queensland chain, Goodlife Health Club. Macquarie Leisure Trust Group said the acquisition would allow it to offer gym memberships to its existing customers at Gold Coast fun park, Dreamworld, and AMF Bowling clubs. 'Gyms are relatively fixed cost but can have healthy margins through membership offers,' said the trust's chief executive, Greg Shaw. Goodlife comes with 18 fitness centres. Page 22.
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THE AGE (www.theage.com.au)
PricewaterhouseCoopers (PwC) expects pay-television (pay-TV) to become a household 'necessity' over the next five years. In its Australian Entertainment & Media Outlook, PwC forecasts annual growth of 11.4 percent for the pay-TV sector, more than double the expected overall industry rate. 'Subscription television will become an increasingly powerful force...by personalising its services,' the report says. Discounted prices for entry-level plans and the popularity of digital video recorders were important growth factors. Page B2.
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Analysts say Wesfarmers' A$22 billion takeover bid for Coles Group remains in doubt, despite both stocks reversing a slump on the sharemarket yesterday. Shares in Coles rose 2.2 percent to A$14.51 after a 10-day decline, while Wesfarmers put on 1.1 percent to A$38.99. However, the value of Wesfarmers' cash and scrip offer has fallen by A$2.5 billion since July 2, when the Coles board recommended the deal to shareholders. 'A number of shareholders want either a higher share or cash component,' Shaw Stockbroking advised. Page B3.
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Ratings agency, Cannex, has warned the popularity of low-documentation loans could inflate house prices. A 'plethora of low-doc offers' had made it easier for borrowers unable to get a loan 'traditionally' to buy a home 'sooner rather than later,' Cannex said. Furthermore, there was 'a price to pay for being discreet,' and 'non-bank' borrowers who overestimated their earnings could 'bear the risk of foreclosure.' The Australian Prudential Regulation Authority recently said it was 'comfortable' with the higher charges accompanying low-documentary loans. Page B3.
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HSBC Australia intends to take advantage of its global network to build up its domestic banking business, after posting A$59 million for the six months to June 30. 'The success of a foreign bank in Australia depends upon focusing on your areas of competitive advantage,' said chief executive, Stuart Davis. He rejected the idea of opening more branches, a strategy adopted by HBOS subsidiary, BankWest. 'For us to do a similar strategy...would simply be playing into the sweet spot of the local majors,' he said. Page B3. --
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