Whitehaven Coal shareholders are strongly supporting its $US3.2bn-plus ($5bn) purchase of BHP’s Daunia and Blackwater coal mines, with shares on Wednesday soaring 12 per cent on the announced news.
The big relief for shareholders was that the company paid what appears to be a decent price and didn’t have to raise equity to fund the purchase.
Whitehaven’s frontrunner status was well flagged by this column weeks ahead of the official announcement, while the ballpark price and the structure of the transaction, where Whitehaven will pay $US2.1bn upfront and $US1.1bn over three years, with the potential to outlay a further $US900m subject to various earn out hurdles, was largely in line with what the market was anticipating.
Hedge fund Bell Rock, which owns less than 5 per cent of the stock and had been against a deal, may now well be a seller.
To pay for the asset, the cashed-up Whitehaven will outlay $US1.5bn from its own balance sheet and use $US900m for a bridging loan until it can shore up the finance, no easy feat for coal companies.
It may look to sell down the assets to steel producers over time, yet most expect the money to come from the more costly alternative lending market rather than mainstream banks.
Mirvac nabs Serenitas
Mirvac and Pacific Equity Partners paid a full price for Serenitas at $1bn, but market experts say they rate chief executive Rob Nichols, who keeps skin in the game.
The concern is that Mirvac may find it tricky to get synergies while only owning 47.5 per cent, leaving it without operational control, which some think dilutes some of the upside.
Mirvac was a bidder on the land lease business Halycon that was snapped up by Stockland last year for $620m, but was well off the pace that time in terms of price.
This deal was struck on a cap rate some estimate to be about 4.6 per cent to 4.8 per cent, which shows how bullish the market is on the land lease communities sector.
It gives the pair more than 6,200 sites, including over 4200 occupied and around 2000 sites to be developed, at a time the country is in need of affordable housing alternatives.
The deal was first flagged by DataRoom back on July 23.
Halycon’s homes sold at about $600,000 each, whereas those in the Serenitas portfolio are closer to $350,000.
ARN makes waves
Two areas of opportunity to achieve cost savings in ARN Media’s bid for Southern Cross Media Group are around negotiations with KIIS FM stars Kyle Sandilands and Jackie O, said to be negotiating with both parties for a $200m package over 10 years. This $225.5m deal may provide an opportunity to reward them instead with equity based on upside in the business.
Another is for the loss-making digital audio businesses of both groups to reach a break-even position through synergies. Analysts believe a purchase could add about 15 per cent to ARN Media’s earnings.
Hedge funds like what they hear at Southern Cross
Triple M and Hit radio network owner Southern Cross Media Group may soon have some hedge funds on its share register.
More exposure to copper the prize for big miners
Moves by BHP and Rio Tinto to think about major transactions says a lot about their expectations for the country’s iron ore production.