ASX lifts as investors cheer exit of Westpac CEO Brian Hartzer
Westpac investors have cheered the resignation of chief Brian Hartzer, while Caltex jumped on a $8.6bn takeover bid.
- Investors sent ‘clear’ message: Maxsted
- Caltex confirms $8.6bn takeover bid
- Consumer confidence at four-year low
- Hartzer bonus payments slashed
That’s it for the Trading Day for Tuesday 26 November. Investors cheered news of board and management overhaul at Westpac, fuelling a slight recovery in financials and a lift in the broader market. RBA deputy governor Guy Debelle spoke through the day on how weak wages growth would be the new normal, ahead of a speech by governor Philip Lowe tonight.
Perry Williams 4.50pm: Caltex bid may need a lift: RBC
Alimentation Couche-Tard will likely have to bump up its $8.6 billion takeover offer for Caltex to get a deal over the line, RBC Capital Markets said.
The Caltex board is weighing up a $34.50 a share bid after knocking back a $32 per share offer, but the Canadian giant may still have to boost its premium.
“We think that the bid price from ACT is in the ballpark although a small bump may be needed to push a deal over the line as a matter of principle,” RBC analyst Ben Wilson said.
The $34.50 price implies a 9.6x EV/EBITDA multiple based on FY20 forecasts, RBC estimates, while its own $32 share price target is based on a 9 times multiple.
“While we have earnings growing modestly beyond FY20E, we do not think there is sufficient system growth opportunities in the core Australian wholesale/retail fuel markets to justify a multiple materially higher than ~10x EV/EBITDA,” Mr Wilson said.
Should Couche-Tard win control it could look to offload some of the fuels and infrastructure assets which account for two-thirds of Caltex’s earnings.
“In the event the takeover of Caltex succeeds, Couche-Tard may look to divest some or all of the F&I business including the 108kbbl/d Lytton refinery in Brisbane although this is unclear at this point. We have noted that a significant portion of Caltex’s appeal is in its integrated model and the moat-like characteristics of the F&I business.”
Caltex closed up 13.43 per cent to $33.79.
4.38pm: Bank boost cements ASX gain
Banks drove much of the market strength on Tuesday, thanks in large part to the board and management overhaul at Westpac.
The bank capped a four-day, 8.8 per cent losing streak, bouncing back after chief Brian Hartzer resigned, and chair Lindsay Maxsted brought forward his retirement. At the close of trade, the bank was higher by 1.7 per cent to $24.86.
Meanwhile, across the rest of the majors Commonwealth Bank added 1 per cent to $80.74, ANZ edged up by 0.4 per cent to $24.94 and NAB eked a gain of 0.3 per cent to $26.15.
Bank of Queensland returned to trade after raising $250m in an institutional raise at $7.78 a share – the stock closed down 5.8 per cent at $8.14.
Caltex was a standout, its shares surged 13.4 per cent to $33.79, after hitting a 12-month high of $34.23, on receipt of a $8.6bn takeover offer from Canadian convenience group Couche-Tard.
The deal largely drove outperformance in the energy sector, which clocked a 1.8 per cent rise by day’s end. Oil Search slipped by 0.1 per cent to $7.29, Beach Energy added 1.7 per cent to $2.38 and Woodside rose by 0.9 per cent to $34.28.
Gold miner Evolution jumped by 2.4 per cent to $3.90 after announcing its intent to acquire the Red Lake gold mine in Canada, confirming earlier reports by The Australian’s DataRoom.
4.14pm: Shares rise for third consecutive session
A bounce in Westpac helped to fuel a rally on the local market on Tuesday, its third consecutive gain to reach its highest level in a week.
Shares surged as much as 1 per cent to 6797.6 at midday, but settled to a 56 point or 0.83 per cent rise to 6787.5.
Meanwhile, the All Ords edged up by 54 points or 0.79 per cent to 6889.8.
Perry Williams 3.32pm: Caltex wary of losing ‘future upside’
Caltex shareholders may be wary of losing out on ‘future upside’ as they weigh the merits of an $8.6 billion bid from foreign suitor Alimentation Couche-Tard, equities research firm MST Marquee said.
“As far as we are concerned there is still a shed load of value on the table for potential suitors, so we would most certainly not rule out a bid for Caltex,” MST energy analyst Mark Samter said in a note released before the takeover approach was confirmed.
“We just still hope that Caltex and shareholders get to reap the full benefits on offer and don’t hand over a large part of that upside to someone else.”
Couche-Tard operates 16,000 retail fuel sites globally in its home market of Canada as well as America and Europe and also 2250 international sites under the global Circle K brand.
While there’s been speculation Caltex’s move on Monday to spin off a chunk of its property sites via a float was a defensive move against the takeover, Mr Samter said he thought the move would have been made by chief executive Julian Segal and finance boss Matt Halliday to help unlock the company’s value.
3.18pm: Seek warns of macro downside
Jobs classifieds group Seek has warned that any deterioration in macroeconomic conditions could weigh on its full year results, but cautiously reaffirmed its full year guidance at its AGM.
Noting that forecasting was difficult given the group’s exposure to macro conditions and exchange rates across multiple markets, the group said it was targeting earnings growth between 8pc and 11pc, and net profit between $145m and $155m.
“Volatile conditions will impact near-term results, however our focus will remain on investing to grow Seek’s long term value,” it said.
Chairman Graham Goldsmith used his speech to investors to detail the struggle in securing a strong staff talent pool, saying expected votes against the company’s remuneration report were “disappointing”.
He echoed similar sentiments to Telstra’s John Mullen, that it was difficult to compete for talent with unlisted tech companies and private equity.
Mr Goldsmith said the board and remuneration committee strived to strike a balance that “supports our strategic intent and the ability to attract and retain the world class talent”.
“This is increasingly challenging for SEEK as our key sources of competition for talent are global technology companies and private equity firms who have very different remuneration structures, offering potentially very high rewards.”
SEK shares last up 3 per cent to $23.09.
2.50pm: a2 chair, chief sell down shares
The heads of a2 milk have both sold down their stakes in the company, citing personal and tax obligations.
In a statement to the market, a2 said chair David Hearn had exercised 100,000 unlisted options, and sold them on the NZ market for $NZ14.83 a share “as part of his management of personal finances, including to meet tax obligations”.
But the company says some of those proceeds would be used to exercise more options.
To chief Jayne Hrdlicka, and the company reports she received ordinary shares on the vesting of time-based rights granted as a transition payment as compensation for leaving her previous role.
Of those rights received, Ms Hrdlicka sold down 61pc in order to meet her expected tax obligations.
“Following Ms Hrdlicka’s recent sale of shares she retains a relevant interest in 95,338 ordinary Shares in the Company, with a market value today of approximately 85pc of her fixed annual remuneration before tax, as well as 410,099 Performance Rights received under the Company’s FY19 and FY20 LTI Plans,” the company said.
A2M shares last up 1pc to $14.13.
2.39pm: Investors strike against NRW bonuses
Investors have pushed back against the remuneration report for NRW Holdings, serving the company a first strike at its AGM this afternoon.
More than 44 per cent of shareholders voted against the remuneration report, triggering the first strike, but a spill of the company’s board was voted down by 93pc of votes.
The executive incentive scheme for chief Julian Pemberton was the key point of contention for shareholders, with 47pc voting against the resolution – but still, that too was carried.
Mr Pemberton is to receive 1,164,490 performance rights valued at $2.47 apiece, equating to almost $2.9m.
Perry Williams 2.08pm: Caltex offer undervalues control premium
Caltex shareholder Touchstone Asset Management has rubbished a $8.6 billion takeover tilt from Canada’s Alimentation Couche-Tard as vastly undervaluing the company.
While Caltex’s board is still weighing up a $34.50 a share offer from the Canadian suitor, the Bennelong Funds Management-backed Touchstone said a further premium would need to be paid for it to win control.
“While we always welcome corporate interest, a takeover bid has to be fair, and reflect a full control premium, the recent bid from Alimentation Couche-Tard Inc does not,” Touchstone investment director Jack Chemello said. “Plenty of work has been done over time that establishes control premiums are typically around the 30 per cent level, this one is barely half that.”
Couche-Tard first approached Caltex with a $32 a share offer on October 11, representing a 25 per cent premium on the prior day’s share price, which was rejected by Caltex’s board.
A hike to $34.50 a share was then tabled to the Australian fuels retailer on November 15 and subsequently disclosed to the market this morning.
“Right now Caltex is trading at a very substantial discount to its intrinsic value – shareholders need only look at their balance sheet to realise that. Hence we would expect suitors also take that fact into account when making takeover offers, assuming they wish to succeed,” Mr Chemello said.
Caltex last up 12.3 per cent to $33.45.
2.03pm: Alibaba soars on HK debut
Shares of Alibaba Group Holdings gained 6.3pc on their trading debut in Hong Kong as the Chinese e-commerce giant wrapped the year’s biggest listings.
Shares opened at $187 Hong Kong dollars ($35.25) on Tuesday morning compared with the HK$176 offering price that allowed Alibaba to raise HK$88 billion in its secondary listing in Hong Kong, where political protests continue to rage.
The deal is the biggest public offering so far this year, surpassing Uber Technologies’s $US8.1 billion New York offering in May.
Alibaba’s high-profile listing is viewed as a show of confidence in Hong Kong as months of political unrest and escalating violence clouds the city’s business and economic growth.
Dow Jones Newswires
1.56pm: Bougainville Copper shares surge
Shares in Bougainville Copper, the former operator of the giant Panguna gold and copper mine that was shut by civil war, have surged in recent days as an independence vote on the island raises expectations of a possible restart to mining.
The value of BCL shares has tripled since early last week to trade at 35c on Tuesday, coinciding with the start of a non-binding independence referendum in Papua New Guinea’s region of Bougainville, which has kicked off in a peaceful atmosphere.
The referendum, which runs until December 7, is a key part of a peace agreement reached in the aftermath of a decade-long war between Bougainville’s rebel fighters and Papua New Guinea forces that ended in 1998 and took about 20,000 lives.
BCL’s general manager Mark Hitchcock said in a statement to Reuters he believed the investor interest in the company reflected increased levels of confidence in Bougainville’s future.
Formerly controlled by Rio Tinto, BCL now counts the PNG government and Autonomous Bougainville Government as major shareholders.
AAP
1.26pm: US, China reach consensus: reports
Risk assets are taking a step higher in afternoon trade, after reports that the US and China had reached a consensus on each other’s core concerns.
China’s Xinhua news agency is reporting Chinese vice premier Liu He, the nation’s top negotiator, had a call with US Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin on Tuesday to discuss each other’s core concerns.
That’s prompted a dip in the safe haven yen to a two-week low, and pushed US futures higher.
Chinese Vice-Premier Liu He and US Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin Tue talked on the phone. The two sides reached consensus on resolving relevant issues and agreed to maintain communication on remaining issues of the phase-one deal. pic.twitter.com/2pyG27ZxRL
— People's Daily, China (@PDChina) November 26, 2019
1.18pm: Regal halted for ASIC investigation
Fund manager Regal Investment has requested a halt of its trade, saying it is under investigation by the corporate watchdog.
In a filing to the local bourse, Regal did not disclose the nature of the issue, saying only that it was under investigation and would disclose further information in the coming days.
“We expect to be in a position to request for the trading halt to be lifted once further information is obtained by Equity Trustees (the responsible entity of Regal) on the particulars of the ASIC investigation and the alleged parties and individuals involved,” the filing reads.
1.04pm: Stocks push higher
The local market is holding higher at lunch, with a boost in Caltex and Westpac driving the market to as much as 1 per cent gains.
At 1pm, the ASX200 is higher by 0.8 per cent to 6788.5, nearing a five day high.
Westpac has extended its gains to 1.8 per cent, while Caltex is surging by 12.5 per cent on receipt of a takeover bid.
Elsewhere, BOQ is slipping as it resumes trade after a capital raising, while CSL is lifting 1.5pc after Goldmans yesterday tipped its share price to reach $300.
Here’s who’s leading the pack at lunch:
12.51pm: Westpac issues to tar all banks: S&P
Austrac issues identified at Westpac are likely to wash across the rest of the sector, with compliance and conduct likely to remain a drag across the rest of the majors, according to ratings agency S&P.
In a note following the resignation of Westpac chief Brian Hartzer this morning, analyst Sharad Jain writes that the major Australian banks are in for a tough two years ahead, with potential for weaker earnings to impact their creditworthiness.
“Lower earnings would erode the buffer for the banks to absorb any unforeseen losses … and would reduce the support the banks receive from their equity investors. Finally, continued pressure on earnings could trigger greater risk-taking by the banks,” Mr Jain said.
“While Westpac will bear the direct financial penalties from the Austrac case, the broader damage from such lapses extends to all the Australian major banks.”
“We consider that these events hurt the major banks’ franchise within the Australian community as well as its investor base, which is likely to prolong, and potentially even deepen, the governance and risk management related difficulties that the Australian major banks have been facing.”
Olivia Caisley 12.36pm: Treasurer to unveil new bank legislation
Josh Frydenberg will this week introduce two new pieces of legislation from the banking royal commission amid a banking scandal engulfing major Australian bank Westpac.
The Treasurer on Tuesday said he welcomed news Westpac chief executive Brian Hartzer was stepping down over a money laundering and child exploitation scandal.
Mr Frydenberg told reporters in Canberra the scandal exposed a lack of appropriate oversight, as well as systemic failures at the bank.
“We’ve increased both the civil and criminal penalties for misconduct in the financial sector,” he said of the government’s response to improving the banking industry.
“This week I’ll be introducing two pieces of legislation which will implement more of those royal commission recommendations.”
WBC shares last up 1.5pc to $24.80.
12.34pm: Policy glass more than half full: Powell
America’s monetary policy is set to continue the good times for workers while nudging inflation back to where officials would like to see it, the Federal Reserve chief said Monday.
The remarks from Federal Reserve Chairman Jerome Powell underscored central bankers’ view that they are likely to hold their fire for the coming months after cutting interest rates three times this year.
“Monetary policy is now well positioned to support a strong labour market and return inflation decisively to our symmetric 2 per cent objective,” Powell said in a speech to the Greater Providence Chamber of Commerce in Rhode Island.
In a look back at developments over the year, Powell said that, while the outlook appeared healthy now, there had been some scares during 2019.
Weakening global growth and President Donald Trump’s trade wars together hit US exports, weakened the manufacturing sector and sapped business confidence, which weighed down corporate investments.
Additionally, inflation was vexingly low, adding to worries of falling into a Japan-like cycle of low growth from which breaking from could be hard.
But the strong labour market and wage gains are supporting household spending and consumer confidence — representing about 70 per cent of the economy, said Powell.
“At this point in the long expansion, I see the glass as much more than half full,” he said, according to prepared remarks, adding that, with the right policies “we can fill it further.”
AFP
Perry Williams 12.05pm: Caltex IPO a defence strategy: Vertium
Canadian convenience store operator Alimentation Couche-Tard has the financial firepower to pull off its $8.6 billion takeover tilt at Caltex with the local company’s planned property spin-off likely formed as a defence strategy, Vertium Asset Management portfolio manager Jason Teh said.
Caltex caught some market watchers by surprise with its decision on Monday to proceed with a long-considered strategy to pursue a $1bn-plus property initial public offering to help unlock value in the fuels retailer.
But the move was made partly as a response to its Canadian suitor which increased its takeover proposal to $34.50 a share from an initial price of $32 a share, after the earlier bid was dismissed by Caltex on price grounds.
“I suspect obviously they see could see someone was stalking them and they’re doing this as a defence mechanism,” Mr Teh told The Australian. “While yesterday’s announcement had been long speculated, it really came out of the blue but you can now see the bigger picture.”
The Caltex board said it is currently considering the $34.50 a share proposal and obtaining advice from its advisers UBS and Grant Samuel.
“The Caltex board is focused on maximising shareholder value and will carefully consider any proposal that is consistent with this objective.”
Caltex shares last up 12 per cent to $33.38.
11.44am: Investors sent ‘clear’ message: Maxsted
Westpac chairman Lindsay Maxsted is speaking on investor call and says what changed to prompt the exit of chief Brian Hartzer this morning.
Mr Maxsted says discussions with investors in recent days sent a “clear” message the bank needed to “go above and beyond” the response plan outlined on the weekend.
He said a global search for a new CEO was underway, and that the search will include internal candidates. Internal candidates “will be welcomed in the process,” Mr Maxsted said
11.42am: Westpac, Caltex send ASX to 1-week high
The Australian sharemarket has jumped 0.8pc to an almost one-week high of 6783.3 after the US market surged to fresh record highs overnight.
As was the case on Wall Street, M&A activity is magnifying the strength, with Caltex up 12pc at $33.41 after disclosing a $8.6bn takeover bid from Canada’s Couche-Tard pitched at $34.50 a share.
But Westpac is the single biggest contributor to strength, surging as much as 1.9pc to a two-day high of $24.90 after axing its CEO and Chair in response to the money-laundering charges from Austrac.
Westpac and Caltex together are adding about 10 of the 52 point rise in the ASX200 so far today, and another 6 points is coming from CSL, which has surged 1.6pc to a record high of $277.76.
11.31am: Debelle joins chorus against Westpac
RBA Deputy Governor Guy Debelle is the latest official to slam Westpac for the money laundering charges levelled by Austrac.
Answering a question at an ACOSS event in Canberra, Dr Debelle says the allegations against Westpac are “serious and disturbing”.
Westpac shares are up 1.7pc at $24.85 after the bank axed its CEO and Chair over the money laundering charge.
11.17am: Caltex jumps on takeover bid
Shares in Caltex have jumped by 12 per cent on its return to trade, after announcing the receipt of a $8.6bn takeover bid from Canadian convenience group Couche-Tard.
Caltex said it had already denied a $32 per share bid, but that it was considering a bid for $34.50 per share.
Shares in the company were last trading up 12 per cent to $33.31.
Rosie Lewis 11.00am: Tight jobs market needed: Debelle
The Rudd government’s decision to lift the pension age to 67 years old has seen affected Australians working longer, lifting the participation rate and prompting a need for stimulus, according to Reserve Bank deputy governor Guy Debelle.
Addressing the ACOSS national conference in Canberra, Dr Debelle said there was tentative evidence that the 2017 changes to the pension age “had an impact on workers’ retirement decisions”.
“The participation rate of those born in 1952 and 1953 (who were affected by the changes in 2017) does not decline as quickly when they turned 65, compared to the earlier cohort groups that were not affected by the pension age increase,” he said.
“In aggregate, this analysis suggests that the pension changes boosted the participation rate by around 0.1 percentage point.”
In a speech on the outlook for incomes and employment, Dr Debelle said the two major shifts in workforce participation had been from women aged 25-54 and older workers.
This increase in labour supply has meant that the strong employment outcomes in recent years has not generated the pick-up in wages growth that might otherwise have occurred, Dr Debelle said.
Important discussion on labour force makeup, slow wage growth & unemployment with Dr Guy Debelle from the Reserve Bank at #ACOSSConf2019 pic.twitter.com/cFVlISjbqe
— ACTCOSS (@ACTCOSS) November 26, 2019
10.55am: Cleanaway to rebuild fire-hit facility
Cleanaway says it will rebuild its fire-damaged recycling facility northeast of Perth.
The ASX-listed waste management firm said on Tuesday that the Guildford plant sustained extensive damage in Monday’s blaze, but that no one was injured.
“Cleanaway intends to rebuild the site and will commence the process of recovering losses arising from the incident under its existing insurances,” Cleanaway said in a statement.
The company said it was working with customers and other suppliers to determine alternative processing solutions for materials destined for the facility. Cleanaway said the fire would not have a material impact on earnings for the current financial year.
CWY shares last up 1pc to $1.99.
AAP
10.36am: Austrac ‘manageable’ for Afterpay: MS
Morgan Stanley says the final auditor report for Austrac looks “manageable” for Afterpay.
“Importantly, it does not recommend significant operational changes, adverse findings against the Board or monetary penalties,” says MS analyst Edward Pham.
Mr Pham has kept his Overweight rating and $44.00 price target.
APT last up 1.6pc at $33.17.
Cliona O’Dowd 10.29am: Hartzer exit gives ‘breathing space’: BP
Bell Potter banking analyst TS Lim said he wasn’t surprised at the exit of Mr Hartzer, and was confident his departure would provide Westpac with “some breathing space”.
“It was expected, it was becoming quite untenable. It’s probably going to take the heat out of the AGM coming up. I think they had no choice but to [exit the CEO],” he added.
“It will give the bank some breathing space. The responsibility will now fall to Peter King. I’ve got a lot of time for him, I think he was a good choice.”
Mr Lim said he thought the board had done as much as it could for the time being.
WBC last up 1.15pc to $24.72.
10.16am: Investors cheer Westpac reshuffle
Investors are cheering the exit of Westpac’s chief, fuelling a rebound in the stock after wiping out its year-to-date gains over the past four days of weakness.
In early trade, the bank is higher by 1.2 per cent to $24.74, after a surge as much as 1.3pc early.
That’s adding to the broader index strength, with the benchmark ASX200 higher by 40 points or 0.6 per cent at 6875.
The rest of the major banks are all higher, while Bank of Queensland has slipped on its return to trade after raising $250m in an institutional placement.
Caltex shares remain halted at $29.79 after the receipt of a takeover bid from Canadian convenience group Couche-Tard.
10.05am: Caltex confirms $8.6bn takeover bid
Fuel group Caltex has this morning confirmed its in the sights of Canadian convenience outfit Alimentation Couch-Tard, in receipt of a cash offer worth $8.6bn.
The latest bid, worth $34.50 apiece, comes after a previous $32 apiece bid that was rejected by the group.
“The discussions between Caltex and ACT are at a preliminary stage, the proposal is highly conditional and there is no certainty that these discussions will result in a transaction,” it said.
The move comes just a day after Caltex announced a move to spin-off its retail sites in a separate IPO said to be worth as much as $1bn.
10.02am: Consumer confidence at four-year low
Consumer confidence slumped to a four-year low on the weekend, according to an ANZ survey that suggests people are bracing for gloomy economic conditions.
The ANZ-Roy Morgan Australian Consumer Confidence index fell 2.8 per cent from the previous week, with respondents’ positive views of the economy over the next 12 months falling 1.3 per cent and sentiment about conditions during the next five years plummeting 4.6 per cent to an all time low.
The weekly measure of consumer mood, which is based on about 1,000 face-to-face interviews conducted on Saturdays and Sundays, also registered a 4.4 per cent decline in how people thought about the outlook for their family finances during the next 12 months.
AAP
Not the thing you want to see heading into Christmas season. https://t.co/2A5Fi7UOkP
— David Plank (@DavidPlank12) November 25, 2019
Bridget Carter 9.46am: Caltex IPO positive for potential suitor
DataRoom | Investment bank Goldman Sachs in understood to have been working with Canadian convenience store operator Couche-Tard for a possible acquisition of the $7.4 billion fuel retailer and refiner Caltex for about a year.
However, the Canadian suitor that has been scanning the Australian fuel retailing market in recent years for opportunities has shied away from embarking on a deal because it does not want to acquire the Caltex infrastructure terminals, only its retail network.
Apparently, Goldman Sachs has been working to find a partner for Couche-Tard on a possible deal that would take the infrastructure assets, but this has so far been without success.
At least one other major buyout fund has also been working on a plan to buy Caltex and South Australian fuel retailer Peregrine Corporation and bring the two businesses together, say sources.
However, Peregrine was not thought to be a seller.
Former Caltex chief financial officer Simon Hepworth is also understood to have been involved in plans to work on a privatisation of Caltex.
It comes after Caltex on Monday announced plans to embark on a $1bn property float made up of a half-stake in 250 of its retail sites in what some believe is a move that could make an acquisition of the business now easier for Couche-Tard as it would require a smaller cheque.
9.37am: Westpac reshuffle could prompt bounce
Westpac shares are matching 2pc lower around $23.95, based on the bid-offer in the pre-market.
But some traders are betting on a positive share price reaction to the bank axing its CEO and Chair.
At least initially, it may deflect some of the intense criticism from investors, politicians and the wider public.
“There may be a dead cat bounce initially, but there’s still potentially lots of bad news ahead for this stock,” says one senior institutional trader.
If investors continue to worry about the risk of reputational fallout, the share price has obvious support from the December 2018 low at $23.30.
WBC shares closed Monday at $24.44
So its not just Hartzer that Gone from #WBC.... All gains in '19 have too - A year that is on track to be double the return of the historical average for the ASX. #ausbiz pic.twitter.com/IKsB9JgXiu
— Evan Lucas (@EvanLucas_INV) November 25, 2019
Joyce Moullakis 9.31am: Hartzer to pocket $2.7m on exit
Outgoing Westpac chief executive Brian Hartzer will pocket fixed pay of $2.7 million, but will forgo a much larger amount of up to $22m in short-term and long-term bonuses as a result of the explosive Austrac legal action.
The bank announced Mr Hartzer would step down as CEO on December 2 and be paid out his 12 month notice period.
He has fallen on his sword given the financial crimes agency, Austrac, lodged damaging action against the bank last week alleging it breached the law 23 million times and helped facilitate child exploitation.
“Both Mr Hartzer’s unvested deferred short-term variable reward and unvested long-term variable reward will be forfeited,” Westpac’s statement to the ASX said.
“In addition to forgoing his FY19 short-term variable reward, Mr Hartzer will also not be eligible for short-term variable reward in FY20 or FY21.”
In 2020 Mr Hartzer – depending on hurdles being met – could have earned a short term bonus of $2.7m and maximum long-term incentives of $3.6m.
9.25am: Focus on Westpac at ASX open
Australian sharemarket focus today will mostly be on US gains and Westpac axing its CEO and Chair.
Westpac shares may be volatile and there’s ongoing uncertainty about the penalties it faces but management changes today should deflect some criticism, allowing shares to form a short-term bottom.
Futures implied the S&P/ASX 200 would open up 0.6 per cent at 6772 before the news on Westpac.
Overnight, the US sharemarket surged on hopes of an imminent US-China trade deal as well as M&A activity within the consumer sector.
The Nasdaq surged 1.3pc to a record high of 8632, driving the S&P 500 up 0.8pc to a record high 3133.64 but the surge in shares wasn’t matched by significant gains in other risk assets.
Later today, RBA Deputy Governor Guy Debelle speaks on “Employment and wages” and Fed Char Jerome Powell speaks at 11am AEDT.
But the main event will be RBA Governor Philip Lowe’s 8.05pm AEDT speech on “Unconventional Monetary Policy: Some lessons from overseas”.
9.23am: BOQ returns to trade after $250m raise
Bank of Queensland will resume trading this morning, following a successful $250m institutional share placement at the top of its bookbuild range.
Shares will be issued at $7.78 per share, and last traded at $8.64.
“The funds raised will further increase BOQ’s buffer above APRA’s “unquestionably strong” benchmark and provide BOQ with additional capacity to support implementation of our strategic transformation,” chief George Frazis said.
9.18am: What’s impressing analysts, what’s not
- Alumina cut to Neutral – Credit Suisse
- AMP cut to Sell – UBS
- Bank of Queensland raised to Neutral – UBS
- Caltex raised to Overweight – Morgan Stanley
- Caltex cut to Hold – Morningstar
- IPH raised to Buy – Goldmans
- Mayne Pharma cut to Underweight – Wilsons
- Painchek rated new Buy – Canaccord
- Seven West cut to Sell – Goldmans
- Sigma Health cut to Sell – Citi
- Spark Infrastructure raised to Neutral – Macquarie
Bridget Carter 9.15am: Evolution taps Goldmans for Canada buy
DataRoom | Evolution Mining has tapped Goldman Sachs for its acquisition worth up to $US475 million of the Red Lake mining complex in Canada, purchased from Newmont Goldcorp.
The underground gold mining complex is one of the largest in the world.
It is based in Ontario and in 2018 the mine priced 276,000 ounces of gold.
Evolution fenced off competition from Canadian miners and Australia’s OceanaGold to buy the asset.
Expectations have been mounting for some time that Australian gold miners would go in search of acquisition opportunities in Canada at a time that their share prices touch fresh highs this year on the back of strong demand for the commodity and as gold hit a record high in August.
Evolution is known to have been a keen buyer in Canada.
Newmont is selling Red Lake after it made a $US10bn ($14.74bn) acquisition of Goldcorp, which at the start of the year was the world’s fourth-largest producer, but has since become the second-largest producer of the commodity.
John Durie 9.12am: Austrac the final straw for Hartzer
The Austrac scandal was only the final straw for Hartzer.
He has underperformed the other banks since being appointed and the royal commission exposed a series of problems, from fees for no service to selling so-called “liar loans”.
Lack of proper diligence is the greatest sin evident in all of the above and the reason why Hartzer fell.
He reportedly told his executive team just to get on with their business and remember this scandal was nothing compared to Enron.
Hartzer was wrong.
Westpac like rest will now face internal upheaval which hopefully will deliver a better banking system.
The final story that sunk Westpac CEO Brian Hartzer https://t.co/l1qA6eNgOf great scoop by @vanOnselenP @australian
— John Lehmann (@lehmannatlarge) November 25, 2019
9.04am: Evolution splurges on Canadian mine
Evolution Mining is pushing further into Canada with the purchase of the Red Lake gold mine in Canada from Newmont Gold for $US375m ($553m).
The underground complex in western Ontario produced 276,000 ounces of gold last year at an all-in sustaining cost of $US988 per ounce.
For the calendar year, Red Lake is forecast to produce 150,000 to 160,000 ounces of gold at AISC of $US1600 per ounce.
As part of the deal, brokered by Goldman Sachs, Evolution has committed to invest $US100m on existing operations and an additional $50m in exploration at the site over the first three years.
The deal will be funded by a new five-year $600m senior unsecured term loan through Evolution’s syndicate of banks.
8.58am: Virgin Velocity buy complete
Virgin once again owns the entirety of its Velocity frequent flyer arm, today announcing a successful $950m debt raise and the completion of its purchase from previous partner Affinity.
In a statement, Virgin said it was using $700m of the proceeds from the raise to fund the purchase, with the surplus to be used for general corporate purposes.
Completion of the deal is expected later today, after it was cleared by the foreign investment review board last month.
8.42am: Gold dips to two-week low
Gold fell for a fourth straight session overnight, hitting a two-week low as investors’ appetite for riskier assets increased on renewed optimism that a resolution to the protracted US-China trade conflict will soon be reached.
Spot gold fell 0.4 per cent to $US1,455.87 per ounce after touching its lowest level since November 12 at $US1,453.40.
US gold futures settled 0.5 per cent lower at $US1,456.90 per ounce.
“There is some renewed risk-on (sentiment) in the market based on the news from the trade deal front … we have seen the bonds trade a tad weaker, yen trading softer as well and gold drifting lower,” said Saxo Bank commodity strategist Ole Hansen.
Hansen added that the stock market “is trading on the assumption that a trade deal of some sort will be reached.” World shares staged a cautious rally, while the safe-haven Japanese yen fell to a one-week low against the US dollar.
AAP
8.17am: Westpac’s Hartzer, Maxsted to go
Embattled bank Westpac has announced CEO Brian Hartzer will step down and chairman Lindsay Maxsted bring forward his retirement in the wake of the Austrac scandal that has rocked the bank for the past week.
Faced with enormous political and community pressure to take action in the wake of the scandal, which included revelations that Westpac did not take appropriate action over transactions linked to child exploitation in Asia, the bank announced the changes in a statement to the ASX on Tuesday.
Current chief financial officer Peter King will take over from Mr Hartzer as acting CEO on Monday, while chief operating officer Gary Thursby will step in for Mr King, the bank announced. There will be a global search for a new permanent CEO, the bank said.
Meanwhile chairman Mr Maxsted will bring forward his planned retirement to the first half of 2020, while long serving director Ewen Crouch has indicated he will not seek re-election. “This will enable an incoming chairman and the board to oversee the appointment of a permanent CEO,” Westpac said in its ASX statement.
The changes come ahead of Westpac’s annual general meeting on 12 December.
“The board accepts the gravity of the issues raised by AUSTRAC,” Mr Maxsted said. “As was appropriate, we sought feedback from all our stakeholders including shareholders and having done so it became clear that board and management changes were in the best interest of the bank.”
Mr Maxsted described Mr King as “an executive of exceptional integrity who is deeply respected by the market and the entire Westpac team”.
“The board has asked Peter to focus on two immediate priorities: to implement the Westpac response plan and to continue to execute the Group’s broader strategy”
7.33am: US shares power ahead
US stocks climbed toward records Monday, buoyed by a rally in shares of technology companies.
The Dow Jones Industrial Average rose 146 points, or 0.5 per cent, to 28021. The S & P 500 added 0.6 per cent and the Nasdaq Composite advanced 1.2 per cent, with both indexes heading toward fresh closing highs.
Stocks around the world got a boost after Chinese officials called for speeding up the introduction of penalties and punitive action for infringement of patents and copyrights in a document released Sunday. The US has indicated it wants clearer assurances that China will follow through on the commitments it has made on the issue, and on others such as agricultural purchases, before negotiators will travel to Beijing for a new round of talks for a “phase one” trade deal.
“People think China is willing to make concessions,” said Lewis Grant, a portfolio manager at Hermès Investment Management. “It shows a willingness on China’s part to come to the table and keep talking.” Optimism on trade sent investors out of gold, which tends to gain favour when money managers are feeling more uncertain about the growth outlook. Gold for November delivery fell 0.4 per cent to $US1,456.60 a troy ounce.
Riskier assets such as stocks rallied, with shares of technology companies among the biggest gainers in the US.
Advanced Micro Devices and Nvidia rose 1.7 per cent and 4.7 per cent, respectively. The semiconductor firms’ shares have often fallen when investors have gotten more nervous about US-China trade tensions and rebounded on signs of progress between Beijing and Washington.
Dow Jones Newswires
7.26am: London kicks Uber out
Uber Technologies lost its license to operate in London, one of its most important markets, after regulators found widespread instances of unauthorised drivers using the ride-hailing app to pick up customers.
The company can continue to operate in the city through an appeals process that could take months. Still, the public reproach over a loophole in Uber’s software threatens to further shake trust in the platform here and elsewhere.
Uber has long found itself in the crosshairs of authorities around the world over what critics say was a corporate culture, built under its former Co-founder Travis Kalanick, that tested the regulatory and legal envelope of countries where it operated. Chief executive Dara Khosrowshahi has said he is trying to repair some of the reputational damage that strategy wrought.
In particular, he has courted London authorities after years of strained relations with city officials, regulators and competitors, including the city’s ubiquitous black cabs. London officials lauded Uber generally for what it said was progress improving the company’s internal issues.
Monday’s ruling, however, shows how the company – in a similar vein to other big tech companies – is now facing questions about its ability to police the behaviour of others on its platform.
Dow Jones Newswires
7.21am: US, China closer to deal
China and the United States are “moving closer to agreeing” on a “phase one” trade deal, according to the Global Times, a tabloid run by the ruling Communist Party’s official People’s Daily.
But the report noted that Washington and Beijing had yet to agree on specifics or the size of rollbacks of tariffs on Chinese goods which has been a major sticking point.
Beijing and Washington are “very close” to a phase one deal, the Global Times said on its Twitter feed on Monday, citing experts close to the Chinese government.
Beijing “remains committed to continuing talks for a phase two and even a phase three deal”, the tweet said.
That information was not included in a report on the Global Times’ website, which was much more cautious about the future of a deal.
“The two sides have basically reached broad consensus for the phase one agreement,” Gao Lingyun, an expert at the Chinese Academy of Social Sciences in Beijing who is close to the trade talks, told the Global Times. Last week, the Chinese government invited US Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin to Beijing for face-to-face talks, the Wall Street Journal reported.
Completion of a phase one deal had been expected in November, but trade experts and people close to the White House said last week it could slide into the new year, as Beijing presses for more extensive tariff rollbacks and Washington counters with its own demands.
Reuters
7.14am: ASX set to gain again
The Australian sharemarket is expected to open higher following gains on Wall Street overnight.
The SPI200 futures contract was up 29 points, or 0.43 per cent, at 6,771.0 at 7.00am AEDT, suggesting a rise for the benchmark S & P/ASX200 on Tuesday. On Wall Street, the Dow Jones Industrial Average was up 0.51 per cent, the S & P 500 was up 0.62 per cent and the tech-heavy Nasdaq Composite was up 1.21 per cent.
The Aussie dollar is buying 67.76 US cents from 67.96 US cents on Monday.
AAP
7.10am: eBay sells StubHub for $US4bn
US online giant eBay agreed to sell its ticket marketplace StubHub to Swiss-based rival Viagogo for $US4.05 billion in cash, the two firms announced Monday.
The move will allow Viagogo, which already sells tickets for live sport, music and entertainment events, to boost its footprint to more than 70 countries around the world.
The deal comes after eBay’s leadership change earlier this year and announcement that it was mulling asset sales in the face of slumping profits.
“We believe this transaction is a great outcome and maximises long-term value for eBay shareholders,” said Scott Schenkel, interim chief executive of eBay, who took over following the departure of CEO Devin Wenig in September.
“Over the past several months, eBay’s leadership team and board of directors have been engaged in a thorough review of our current strategies and portfolio, and we concluded that this was the best path forward for both eBay and StubHub.” Eric Baker, Viagogo’s founder and CEO, also co-founded StubHub while in business school, but left before the business was sold to eBay in 2007.
AFP
ASX 200 falls on China update; BHP leads mining reversal
Iron ore, copper down after China's economic update. RBA's 'step down' in hawkishness evident in September minutes. West African Resources gets reassurance on Burkina Faso permits. Super Retail down as whistleblowers front court.
ASX 200 rises on banks; Arcadium top gainer
Rio Tinto's takeover approach lifts Arcadium Lithium appeal. West African Resources drops on Burkina Faso mining concerns. Qantas may avoid second strike after proxy backing.