OK, so it didn't happen last Friday ... but, as we tipped it would, Stephen Tindall has made his move. In the end the partnership with PEP to privatise The Warehouse still surprised many.
Most of advance talk had focused on the possibility of Tindall selling out. Who knows, that may still be a long term goal. But for now the market talk moves to the next move in what will be a complex but extremely aggressive battle for control of the Red Shed.
Up in the offices of the big institutional investors - on both sides of the Tasman - all eyes are now on Woolworths. There is a hope or even an expectation that a counter bid will come. This takeover is enormous and must be viewed in the context of the giant Australian asset grab that has been played out this year. And the way hard nosed Aussie investors see things the first bid is never the last and the first offer is seldom the only one.
PEP - a veteran of these scraps - knows this all too well. Tindall - who we know has rejected other offers for his shares in the past 12 months - will also have a very good idea of what this company is really worth.
Slimming down
Handling the announcement of job cuts is a difficult balancing act for firms that have to weigh up any negative impact on staff morale with the generally positive response cost-cutting news generates in the market.
Telecom has already conceded it has a process under way which will see significant staff reductions but as to the scale of those cuts - well, it depends who you talk to. Word is that fund managers are hearing a different story to the version being talked about at head office. It's unclear if one version is being talked up or the other talked down - or a bit of both - but with post-unbundling share-price woes, the dividend cut and flat outlook, the pressure is certainly on management to cut costs.
The introduction of new internet-based technology is making substantial cuts more possible and it wouldn't be surprising to see several hundred jobs go in the next year or so. Telecom has a staff of about 6500.
Meanwhile, Telecom's share price remains relatively strong, reaching the great heights of $4.40 before easing back to close steady at $4.35.
Could it be the big international investment funds are starting to look through this year's regulatory mess and are getting back in on the basis that it remains a strong yield play by international standards? Well, let's touch wood. A Commerce Commission statement giving some guidance on the likely direction of mobile regulation is still supposed to be on its way.
In fact, the statement - which Andrew White at Goldman Sachs JBWere last week predicted could knock 23 per cent off Telecom's value - is now technically overdue. It's hard to imagine what could be holding it up - surely there couldn't be any political interference?
Australian view
Despite coming out in favour of a light-handed regulatory regime for airports, the Australian Productivity Commission review of pricing in the sector contained some ominous messages for NZ's airport owners, writes Goldman Sachs JBWere analyst Matt Henry.
The report - which will be an important reference for the New Zealand Government as it considers future regulation of the airport sector - recommended that revaluations not be included in an airport's asset base for the purposes of price setting.
Back in NZ, the revaluation issue is at the centre of the dispute between Auckland International Airport and the major airlines. In July - shortly before negotiations on the new landing charges began - AIA doubled the value of its non-current assets (from $1.3 billion to $2.4 billion).
"While the letter of the law under the current regime may allow a material uplift in charges, in our view each of the airports must balance actions with regard for the risk of regime change," Henry writes.
The risk of the pricing consultation reaching the public and political arenas (which would be the first step towards regulatory change) is material for AIA and Wellington Airport owners Infratil.
Despite the risks, Goldman Sachs is still rating both stocks as long-term buys. It gives Auckland Airport a valuation of $2.37 (it closed down 1c at $2.01 yesterday) and Infratil a valuation of $4.74 ( it closed at $4.08).
Air New Zealand has, meanwhile, been playing a shrewd PR game as far as that public debate goes. Despite the fact that confidentiality about all price negotiations is the status quo under present legislation, it has threatened to release details of the draft pricing proposal to the public. It was a stroke of genius forcing the airport to seek a High Court injunction to stop the release. Whatever the court's decision - due next week - Air NZ can't lose. If it doesn't get to publish the new charges, it will at least have planted the suggestion the airport has something to hide.
Rank makes slow progress
Graeme Hart's takeover bid for Burns Philp opened last Thursday but so far has collected less than 1 per cent of acceptances.
His investment company Rank filed a substantial security notice on Tuesday indicating it had lifted its share of Burns Philp from 57.59 per cent to 58.24 per cent. With Burns Philp shares still trading at a 2c discount to the offer price of A$1.10, logic would suggest the bid is destined to be a success but it seems many shareholders are still going to make Hart wait it out. That's something Hart proved he was good at when bidding for Carter Holt Harvey.
The offer closes on October 9 - it can be extended but the offer price cannot be raised.
VTL finally giving investors numbers they like
Vending machine company VTL leaped another 10 per cent yesterday, adding to its spectacular rise since July. The company's shares have more than doubled in less than three months from 47c on June 29 to close at $1.07 yesterday. VTL management has said for some time that the market was undervaluing it (although what company doesn't say that) and telling investors to look behind the numbers. For obvious reasons investors are sometimes a little sceptical about a company until they see numbers they like. A vastly improved annual result this month - a profit of $2.3 million compared to a loss of $9.8 million - appears to have done the trick. The result is a reflection of the fact that VTL's big investment in the US is starting to pay off. The company paid $5.67 million for 18.9 per cent of Boston-based vending company All Seasons in 2004. It now holds a 17 per cent stake but retains an option to take a controlling stake.
After making the decision to focus on All Seasons, it dismantled its own US infrastructure which meant incurring some costs which contributed to the 2005 loss. Since then, the management has done some cost cutting and restructuring. VTL now says All Seasons is starting to perform well and it will soon exercise its right to take control. It expects to have revenues of $300 million once All Seasons is fully consolidated into its accounts. VTL says it has enough machines in the US to deliver franchise fees of $180 million in the next three to five years.
VTL announced in July it would set up finance companies in Australia and the US - something that may have sparked initial interest in the stock.
This company has had its share of sceptics. It listed in 2000 and has never really delivered on much early promise. The trick now for management is to convert rapid revenue growth into profit. Judging by the buzz about the shares there are plenty picking that they can do it.
<i>Stock takes:</i> Just the first move
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