By Jeff Turnbull
MELBOURNE, Jan 21 AAP – There has been no let-up in merger and acquisition (M&A) activity in the new year following a boom 2004 when Australia led the Asia-Pacific region in a takeover frenzy.
Proposed alliances, some friendly and some hostile, continue unabated with billions of dollars changing hands as companies feed the urge to get bigger.
Just this week, Aussie icon Foster’s Group Ltd launched a hostile $3.1 billion takeover bid for fellow Australian winemaker Southcorp Ltd.
Foster’s laid the platform for the offer, which would make it a world industry leader, by buying the 18.8 per cent strategic stake owned by the Oatley family, which founded and operated Rosemount Estate.
Late last year Coca-Cola Amatil Ltd surprised with its $500 million offer to buy canned fruit and vegie producer SPC Ardmona Ltd. SPC had been in takeover talks with dairy group National Foods Ltd, which itself became a target, lined up by New Zealand’s biggest company Fonterra.
National Foods is now heading towards Filipino food and beverage group San Miguel which came in with a bigger offer, although the market is anticipating Fonterra will respond.
SPC shareholders meet early next month to vote on the Coca Cola proposal which has the full support of the board of the Shepparton-based food group.
“The M&A activity is a reflection of confidence in the outlook, that’s got to be a positive,” said Geoff Joyce, executive director of corporate finance at Macquarie Equities.
Macquarie plays a central role in M&A activity, which last year accounted for $120 billion of business in the Asia Pacific region.
“We’re very busy at the moment – we have started the year with a strong flow of work,” Mr Joyce said. “This is going to be a good year across all sectors.”
Bankers, headed by UBS, collected around $370 million in fees last year assisting companies in their mergers and takeovers.
US-based iron ore miner and pellet producer Cleveland-Cliffs livened up the resources sector last week with a surprise $605 million bid for Australia’s largest independent iron ore miner Portman Ltd.
Portman’s directors said that in the absence of a superior offer they intend to accept the offer with respect to their own shareholdings.
The bid comes while Swiss-based mining outfit Xstrata Ltd is engaged in a drawn-out attempt to consume WMC Resources Ltd. Last November Xstrata announced a $7.4 billion hostile bid to acquire WMC’s copper, nickel, uranium and phosphate fertiliser operations.
The WMC board has urged shareholders not to accept the $6.35 per share offer which it claims is well below the group’s true value.
The Australian media landscape is expected to undergo a transformation with the expected relaxation of cross-media ownership rules later this year.
Already newspaper group John Fairfax Holdings is jockeying for position, amid reports that it’s interested in buying a stake in broadcaster Ten Network Holdings from its Canadian majority shareholder CanWest.
Media shares climbed during 2004 as the companies posted record or near record profits but they were given a major boost when the Howard government was re-elected in October with investors looking for stocks with takeover potential.
It was a hectic 2004 for property consolidation led by the $27 billion merger of shopping mall giant Westfield Holdings.
Property developer Stockland Corp Ltd has met strong opposition in its $7 billion-plus takeover bid for the General Property Trust (GPT), whose independent directors are recommending unitholders reject the offer.
Stockland this week urged GPT unitholders to accept its takeover offer after extending the bid by three weeks.
Nick Farnan, managing director of Management Advisers, believes the focus could turn on to the manufacturing sector this year. “You are going to see manufacturers looking to recognise value,” Mr Farnan said.
“If a manufacturer has not currently got an Asian-based manufacturing facility or capability to outsource existing volume in Australia then they will be vulnerable to consolidation.
“In the automotive sector we are seeing quite a number of supply companies with overseas procurement arms because the low value, high volume steel, rubber and plastic components can be made in China where labour unit costs are measured in cents, not dollars.”
21 Jan 2005
Copyright AAP 2007