Stock takes: Tale of the tape

The Australian business media are billing it as "a battle for the ages". In one corner legendary corporate raider Sir Ron Brierley,72, in the other - tousled young Melbourne hipster Nicholas Bolton, 27.

The prize? Financial services investment fund MMC Contrarian.

Having passed the threshold at which it must make a takeover offer, Sir Ron's Guinness Peat Group this week announced a A$68 million ($83.8 million) bid for the 70 per cent or so of the company it doesn't already own. GPG already has a couple of directors on the board and seems to have an amicable relationship with management.

Shortly afterward Bolton disclosed he had a 5.3 per cent stake in the company.

But Tuaman versus the Mountain Warrior this ain't.

There is little sign Bolton has anything like the financial firepower to seriously bid for the company, while GPG has cash well north of A$500 million.

In line with his previously demonstrated ability to get his finger in the big boys' pies and accept a nice sum to withdraw it, his move at first blush looks more like "greenmail".

This year Bolton extracted a A$4.5 million payment from construction company Leighton Holdings to vote against his own resolution to wind up Queensland infrastructure group BrisConnections.

But if Bolton's stake in MMC represents a potential stumbling block for GPG's ambitions Sir Ron's lieutenant, Gary Weiss, wasn't letting on.

"We'll take as many or as little shares that come our way under the offer," he told Stock Takes this week.

Unlike equivalent scenarios in this country, GPG's offer is not conditional on gaining more than 50 per cent of the company.

MMC holds cash of about A56c per share, GPG's offer is A48c.

Perhaps Bolton's acquisition merely represents some respect for Sir Ron and GPG's ability to pick undervalued companies and "unlock" their value for shareholders.

On the other hand, he may believe that GPG will up its offer to above his purchase price.

MMC Contrarian shares were steady at A48.5c in afternoon trading yesterday.

PIT OF A HOLDUP

Market watchers are still waiting for word from Pike River Coal on its updated mine plan and production schedule which will influence negotiations with key investor, Goldman Sachs' Liberty Harbor.

Two weeks ago Pike River was sold down after announcing yet another production delay which forced the company to renegotiate terms with Liberty which holds US$27.5 million ($39.4 million) worth of convertible bonds.

At the time Pike River's chief executive, Gordon Ward, said Liberty Harbor's initial response was "favourable" and a formal request for an extension to the scheduled delivery of 60,000 tonnes of hard coking coal to Japan would be made once the new plans were finalised.

Stock Takes understands that may involve no small amount of costly 24/7 work at the mine.

One market watcher, who reckons Pike River's share price has shown an uncanny knack for anticipating material announcements, notes they've lost a further few cents in recent days.

The company's taken some criticism for a lack of clarity or certainty around its progress and right now would probably be a good time to provide a little more of that.

Pike River shares closed 1c lower at 99c yesterday.

FAT FINGERS

Shares in Hallenstein Glasson have retreated from the $3.82 they hit this week on what looked like a "fat fingers" trading error.

A few thousand shares changed hands at what was a $1.02 premium to their previous level on Tuesday morning.

NZX described the trades as "extraordinary" but said they were not under review.

Under exchange rules, the parties to the trades can mutually agree to cancel the transactions if an error was made but as of yesterday, the price graphs on NZX's website indicated that had not happened.

Hallenstein Glasson shares have given up most of their gain but have risen again, more modestly this time, to close steady at $3 yesterday.

EXCITING TIMES

While PGG Wrightson might have been hoping to mute some of the rumours around asset sales and its rejigged agreement with its banks, the chatter continues.

The company has agreed with its banks on a package which will see $200 million of debt paid down by March 2010 instead of a previous arrangement that would have seen it repay $125 million in December next year and $75 million in working capital in April.

"It is, in my opinion, that this is what any sensible business would do," managing director Tim Miles said in an internal email sighted by Stock Takes this week. "If times are volatile you reduce your financial commitments."

One of our sources observes: "In all my years in the industry, it would be the first time ever a company that's got itself in difficulties agrees to accelerate repayment to the bank."

Chairman Keith Smith ruled out sales of the company's "major assets such as Fruitfed and Seeds" but didn't mention PGG Wrightson Finance which has been tipped as a likely candidate for sale.

Stock Takes understands Pyne Gould's Marac ran the ruler over the finance firm but simply didn't have the cash.

Miles signed off his email thanking staff for "working passionately to support our customers" and the promise of "exciting times ahead".

No doubt.

PGG Wrightson shares were down 1c at 71c yesterday.

TALK OF THE TOWN - CAN PIGS FLOAT?

While BNZ dismissed it, the Business Herald's report yesterday that a partial NZX float of the bank was on the cards, is clearly not without some basis, according to Stock Takes' sources.

A fund manager at a large local institution said he'd been sounded out by an investment banking firm about a month ago over what seemed to him to be a speculative proposal for a local market float of New Zealand operations targeted at more than one of the major banks.

"They were fishing, there was nothing definite. There's a lot of talk about it but I haven't seen anything specific."

Another well-informed source had heard talk about two banks: BNZ but also ANZ National which appeared to have "far too much equity tied up in this market" and was looking to Asia.

While the source said a large bank would be a welcome addition to the NZX, which lacks such listings, he had some reservations about the reasons.

Taking a somewhat cynical view, it may reflect a bank's desire to reduce its exposure to the, let's face it, less-than-glittering prospects for the New Zealand economy at present.

More particularly and considerably more cynically, our source said talk was that at least some of the banks may be getting jittery about their exposure to the dairy sector and are eyeing the exits.

UNBEATABLE IRONY

Stock Takes was wryly amused by BNZ chief executive Andrew Thorburn's comments this week bewailing New Zealanders' poor savings record and consequent reliance on overseas borrowing.

Isn't this a bit rich given that the big banks have played their part in feeding our borrowing addiction?

It's a bit like a drug dealer complaining about his customers' habit when ingredients become more difficult and expensive to source from local and overseas suppliers.

BNZ's "Unbeatable" campaign helped stoke the so called "mortgage wars" with cheap offshore money, which in turn kept the housing market and credit growth on the boil.

In the face of growing Reserve Bank anxiety, the banks said they were merely meeting customer demand.