Daily Archives: 01/03/2019

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Little hope for creditors as Hastie debts top $600m

Ian Carson, Head of Partners for PPB Advisory.THE administrator of Hastie Group has dashed lingering hopes of substantial returns for creditors, signalling that few businesses of the once-sprawling engineering services company will find new owners.
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Speaking after a creditors’ meeting in Melbourne, Ian Carson, of PPB Advisory, said Hastie’s debt bill included $100 million owed to ”many thousands of creditors”. This is in addition to more than $500 million owed to banks that funded Hastie’s acquisition binge.

Many creditors had travelled from regional areas to hear it was unlikely they would receive ”any extensive” return, given the amount owed to the banks. Mr Carson said some of them were owed ”serious amounts” of up to $500,000.

”They’re really normal, ordinary businesses … and a lot of them are locals – you know, Albury and Shepparton, regional areas,” he said after the meeting. He described the mood of the meeting as ”sombre”.

Mr Carson said that of the 44 businesses under its control, only five had been sold for a combined sum of less than $30 million, and another one or two might be sold for modest amounts.

Receiver and manager McGrathNicol, appointed by Hastie’s banks, has taken charge of Hastie’s better-performing assets, but Mr Carson was downbeat on the prospect of substantial returns from the sale of those companies.

”It’s hard to imagine there being a material return even after McGrathNicol,” he said.

Asked whether he had greater insight into the cause of Hastie’s collapse, Mr Carson said: ”There have obviously been some failures,

whether it’s corporate governance or other things.” He estimated about 1200 jobs had been saved of the 2700 stood down at its collapse. The tally excludes about 1800 workers employed by companies taken over by McGrathNicol.

A spokeswoman for McGrathNicol said yesterday there was no update on its sale process for Spectrum Fire and Safety, Hastie Services, industrial refrigeration systems company Gordon Brothers Industries or Austral Refrigeration. Austral was already for sale when Hastie collapsed.

Earl Setches, secretary of the Plumbing Trades Employees Union, said most of its members had held on to work and their entitlements in Victoria. He said that of the 600-odd Hastie workers in the state, only a handful were now out of work. ”It rocked people’s lives for a week or two, but we’ve had a good outcome,” he said.

Hastie had about 7000 workers around the world when it collapsed late last month, after the discovery of a long-standing accounting ”irregularity” scared off a recapitalisation plan.

Chief executive Bill Wild said after the collapse that Hastie had a culture of ”no bad news” and told staff members they had been let down by management. The collapse has also been blamed on overpriced and badly integrated acquisitions.

On the prospect of legal action, Mr Carson said this had not been his focus so far but he would be meeting directors and shareholders in the months ahead. Listed litigation funder IMF (Australia) and law firm Slater & Gordon confirmed they were monitoring the collapse.

This story Administrator ready to work first appeared on Nanjing Night Net.

Aboriginal groups back off WA claim

ABORIGINAL groups at odds over the James Price Point site marked for a $35 billion gas hub have withdrawn a move to splinter into separate native title claims.
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The West Australian government and the project operator, Woodside Petroleum, had threatened to suspend more than $1 billion in benefits.

It is believed there are long-standing differences over the cultural significance of the site, which includes James Price Point, between the Goolarabooloo and the Jabir Jabir people of the Kimberley region.

But the two groups had remained in the one native title claim group since the 1990s until an application was filed last week to withdraw the claim, which would have allowed separate claims to be registered in time for the next round of land acquisition talks.

It is believed this would have entitled the two groups to participate separately in negotiations over the Browse hub proposal.

But moments before going to court yesterday, those behind the decision to splinter buckled under pressure from the WA government and Woodside to withdraw the application, leaving the groups to remain as a single negotiating body.

The hub at James Price Point is one option for processing gas from the Browse Basin, off the WA coast. Woodside is not expected to make a final investment decision until early next year.

Representing the joint claim group, lawyer Vance Hughston told the Federal Court in Perth that both sides had received letters from Woodside and the state government since the application to end the claim was lodged last week.

They were served with default notices in relation to the previous Browse Precinct Agreement, estimated to be worth about $1.5 billion, as well as being served with notices to suspend their benefits under the agreement.

”The applicants are no longer prepared to push ahead with this discontinuance,” Mr Hughston said by vidoeolink.

”The applicants find themselves in an impossible situation, where the stakes are so high that they’re not prepared to take this matter any further without instructions from the broader group.”

This story Administrator ready to work first appeared on Nanjing Night Net.

Perpetual fends off rumours

Buyers in motion.TAKEOVER fever has gripped the sharemarket without a single bid being made.
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Echo Entertainment and Fairfax Media could soon be in play as billionaires James Packer and Gina Rinehart increase their stakes. Just yesterday rumours swirled that Mrs Rinehart had lifted her share in Fairfax to 15-16 per cent.

But after heavy falls on the market in the past three months, cashed-up raiders appear to be preparing to launch attacks on other weakened companies struggling with the downturn. Following Qantas’ announcement of a defence mandate for a yet-to-be-announced offer, and news of a possible privatisation of Whitehaven Coal, speculation about the intentions of suitors has put a rocket under their weakened share prices.

Yesterday Perpetual Investments became the third company in as many weeks to fall victim to rumours that a private equity firm was circling for a buyout.

Its shares climbed 9.8 per cent, the biggest gain since August 26, after newspaper speculation that Perpetual’s board might be approached with an offer in the $30 range.

Its shares shot to $23.77 in the morning, up from $21.64 the day before.

The unusual price movement prompted a letter from the Australian Securities Exchange demanding to know if the company was aware of information that ought to have been announced to the market.

”Is the company aware of any information concerning it that has not been announced which, if known, could be an explanation for recent trading in the securities of the company?” the letter said.

”In answering this question, please address today’s press report about a private equity firm preparing to approach the company.”

But Perpetual told the ASX it was not aware of any information relevant to the article and that it had no reasons to believe that the article was ”anything other than mere speculation”.

A spokesman later reiterated that point: ”We have nothing to add to the statement we issued to the stock exchange today.”

In late 2010, Perpetual knocked back a takeover offer worth $38-$40 a share from private equity firm KKR.

This story Administrator ready to work first appeared on Nanjing Night Net.

Watchdog has bite at big supermarkets

THE competition watchdog is considering laws to limit the steady increase in market power of the leading supermarket chains.
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In his strongest comments since taking over as the chairman of the Australian Competition and Consumer Commission nearly a year ago, Rod Sims has signalled concern at creeping takeovers by Coles and Woolworths that may be leading to reduced consumer choice and competition.

Existing competition legislation does not put a cap on market share or allow the ACCC to assess the cumulative impact of previous acquisitions when studying new acquisition proposals.

His disquiet comes at a time when the big chains are boosting their position in liquor, grocery and home improvement, ”which raises competition concerns”, he said.

”Barriers to entry for other chains or buying groups to replicate the strong market position of Wesfarmers [Coles] and Woolworths are becoming increasingly high,” Mr Sims said yesterday.

”Added to this often are local barriers associated with, for example, access to sites.”

The ACCC is concerned to ensure further acquisitions do not lead to retail or wholesale industry structures that reduce market competition or choice for consumers.

”Because of these concerns the ACCC has been paying increased attention to incremental acquisitions to identify which acquisitions require review and, of those, which raise competition concerns,” he said.

”I don’t think any other country in the world has an effective law here, which just shows it is difficult,” Mr Sims told journalists yesterday of any legislative response to creeping takeovers.

”It is not an easy area of law, to actually construct a law that works effectively in the marketplace in all circumstances, because if you had a creeping acquisition law it would apply to all sectors. So, doing something that does more good than harm is difficult to construct.

”We’re going to be thinking about it. I do acknowledge the difficulties.”

The ACCC would be in a better position in the next six months to judge the problem of creeping takeovers and rising market power, Mr Sims said.

As an interim step the ACCC is to speed up its review of acquisition proposals in the retail sector by seeking earlier disclosure of plans by retailers, which will then be reviewed by a special team to provide a quicker decision.

”Our processes can be streamlined,” Mr Sims said. ”This can, however, only occur with appropriate notification, co-operation and upfront information.”

The acquisition of smaller retailers was giving the major chains ”substantial economies of scale and scope in, for example, distribution logistics centres and advertising, as well as brand promotion”, Mr Sims said.

This was making it more difficult for competitor groups to emerge, which, together with the difficulty of gaining access to sites, was entrenching the market power of Coles and Woolworths.

”When the major supermarket chains acquire an independent player they remove an alternative from the market, with potentially a different product range and service offering. That competition is unlikely to be replicated by either a chain or new independent given local and/or national entry barriers.”

This story Administrator ready to work first appeared on Nanjing Night Net.

Rinehart dressed for success

CONTROL by stealth is the new black in corporate fashion.
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And the world’s richest woman, Gina Rinehart, is parading the catwalk. Having amassed at least 15 per cent of Fairfax, she is dressed up to get at least one seat on the media group’s board.

There is an expectation that she will move to the 19.9 per cent takeover threshold, but there are no suggestions this will be followed by a full takeover bid.

She picked up at least 42 million shares – or about 2 per cent – yesterday. Given the volume through the market, Rinehart could now have up to 17 per cent of the company.

Regardless of this flurry of share activity, the dial on the company’s share price barely moved – testament to the fact that the market does not see the company as being in play.

Until this week, Rinehart had been sitting on 13 per cent of Fairfax and unsuccessfully agitating for two seats at the board table. Fairfax chairman Roger Corbett had stood firm and some would say provocatively appointed an independent director, James Millar.

But it now appears likely that Rinehart will get board representation.

Her case has been bolstered by support from another of Fairfax’s large shareholders, Allan Gray Australia. With a 9 per cent stake, its boss, Simon Marais, said of Rinehart’s move, ”I don’t have a problem and I think it’s good for the company to have people [on the board] with their own money invested – they tend to be more careful.”

From the Fairfax board’s perspective it seems like a fight it no longer wants to have.

It is believed that neither Rinehart nor her representatives contacted Corbett before wading into the market yesterday and she has visited the company only once since taking her initial holding.

It remains to be seen whether Rinehart, once on the board, will attempt to exercise influence over the company’s evolving strategy or the newspapers’ editorial content.

For Marais and the other shareholders sitting on the register and hoping for some corporate takeover action, including Maple Brown Abbott and Colonial, they could be waiting a while.

Rinehart is the latest in a list of entrepreneurs who have used the cheap control option of taking a stake in a company and placing their people on the board. Kerry Stokes took de facto control of West Australian Newspapers using this play and, more recently, James Packer has been attempting to do the same at Echo Entertainment – the owner of Sydney’s Star Casino.

Echo’s chairman, John Story, resisted the move but was ousted by his own board last week after relentless pressure from Packer.

Packer has only 10 per cent of Echo and does not yet have a seat at the directors’ table. But he plans to increase this when he gets a regulatory green light.

Rinehart has already experienced some success at this game. She was offered a seat on the board of television group Ten, having picked up a 10 per cent holding.

The boards of these targeted companies understand that the predators can move beyond 19.9 per cent by legally creeping up the register by 3 per cent every six months without the need for a takeover.

Using what is called the ”creep” provisions, a suitor can move to near 26 per cent in a year in order to gain a controlling shareholding.

Fairfax, which owns The Age and The Sydney Morning Herald, has been under serious financial pressure as advertising leakage to the lower margin digital businesses and a poor external environment for advertising have crimped profits across all its newspapers – particularly the metropolitan dailies.

But the company’s chief executive, Greg Hywood, this week announced the board expected earnings before interest, tax, depreciation and amortisation of $500 million for the full year.

While this was $20 million below analysts’ forecasts and 18 per cent below last year’s result, there were predictions it could have been worse.

Marais, who did not sell any Fairfax shares yesterday, said he was relieved by the news.

Expectations for a downgrade had been building among some analysts following major profit downgrades from Ten in February and Seven West Media in April and amid continuing gloom about the sector.

But the announcement left the share price unmoved at 60¢, above last week’s record lows of 57¢.

Hywood said revenue for the second half would be about 8 per cent below last year, after the 7.5 per cent fall in January revenues revealed at the company’s half-year results in February, and that ”the difficult trading environment” had continued, as predicted.

However, cost savings under the ”Fairfax of the Future” project were ahead of schedule, he said, ”with the 2012 run-rate exceeding the targeted $40 million and accelerating”.

There are expectations that if Rinehart has a say in the company’s operations, she will be looking to step up the cost-savings target – although this can’t be confirmed given that the mining magnate plays her cards very close to her chest.

She might also be seeking a break-up of the business. Some analysts suggested that a break-up play would only stack up if the Fairfax share price was well below its current levels.

This story Administrator ready to work first appeared on Nanjing Night Net.