Not Even Kerry Stokes' Interest Can Save Wan From Woe

Sydney Morning Herald

Friday April 11, 2008

Edited by Colin Kruger xchange@smh.com.au

There's a 50:50 chance Seven will bid for West Australian Newspapers.

BROKERS took a dim view of West Australian Newspapers' results this week - but the paper group's investors may have to offer a word of thanks to WAN's nemesis, Seven proprietor Kerry Stokes, who was doing his bit to try and prop up the share price.

Earnings downgrades from its third-quarter results were tempered by the possibility Stokes may go for a takeover bid if his attempt to gain seats in WAN's boardroom fails.

"We are increasingly of the view that Seven will ultimately make a full bid for WAN should its attempt to gain control of the WAN board fail," said Merrill Lynch's Alice Bennett and Dominique d'Avrincourt.

"Accordingly, we now assume a 50:50 chance of takeover."

ABN Amro also put up a $12.18 price target, a 10 per cent premium to its valuation, on the "reasonable chance that Seven will make a full bid if it fails to win places on the WAN board" at the April 23 shareholders meeting.

It didn't help much. WAN shares fell 58 cents or nearly 5 per cent yesterday to $11.19.

But then again, media stocks were down across the board yesterday with analysts forecasting a significant advertising slowdown in the next financial year and an advertising recession in 2009-10.

The biggest falls aside from WAN were Austereo - down 10 cents or 6.3 per cent to $1.48, and Fairfax Media down 16 cents or 4.5 per cent to $3.35.

BHP caught speeding

Compared to the rest of its mining brethren, it's certainly extremely rare - and perhaps almost embarrassing - for BHP Billiton to receive a "speeding ticket" from the Australian Securities Exchange.

But that's exactly what happened after its shares rose by up to 5 per cent on Wednesday on speculation Chinese groups were planning to purchase more than 9 per cent of the company.

BHP - which has a policy of never commenting publicly on rumours or speculation - was forced to say it was "not aware of a proposed acquisition by Chinese authorities of a substantial stake in BHP Billiton".

The response isn't surprising, considering Chinalco and Alcoa hardly telegraphed their plans to buy 9 per cent of Rio publicly before a $US14 billion ($US15 billion) share raid earlier this year. BHP added the giant rise in coal prices may have also contributed to its rising share price on Wednesday.

The stock gained 9 cents to close at $42 yesterday.

Game over

Victoria's decision to end Tattersall's and Tabcorp's duopoly over Victoria's poker machines after 2012 won't just affect the two gambling giants.

What happens to the 27,500 poker machines between now and the licence expiry in 2012 - or more precisely what doesn't happen - is of particular concern to poker machine makers like Aristocrat Leisure and Ainsworth Game Technology (AGI).

With the monopolies about to expire, Tabcorp and Tattersall's are expected to minimise their investment in poker machines and extract as much cash as possible. That thought obviously occurred to Aristocrat and AGI shareholders.

Aristocrat shares were down nearly 6 per cent to $9.58 yesterday, while AGI hit another record low at 15 cents.

AGI is already getting knocked about by its exposure to Opes. ANZ Bank owns 7.2 per cent of AGI's stock following the broker's collapse two weeks ago, which certainly explains the 25 per cent fall in the stock's price over the same period.

Woolworths eyes buys

Australian grocery giant Woolworths signalled it may take advantage of a weak US dollar to acquire competitors overseas, adding to operations in India and New Zealand.

The weak US currency and the company's "very strong balance sheet" have created a "window of opportunity on several markets", company chief executive Michael Luscombe said in an interview at the World Retail Congress in Barcelona yesterday.

"It would be quite logical for Woolworths to move into one of the major Asian markets such as India, Thailand or Malaysia to establish a broader geographic footprint," says CommSec. "They would be likely to acquire someone in the market or partner with an existing retailer and apply their skills."

ANZ guards strategy

The rumours of ANZ buying the privately-owned Wing Lung Bank in Hong Kong just won't go away despite ANZ's Asian divisional boss, Alex Thursby, protesting that the group's regional expansion plans are not dependent on such a move.

According to reports yesterday, ANZ (which is about to unveil a large dealing room in HK) is on a short-list with two other institutions, Industrial & Commercial Bank of China and the Bank of Communications, to acquire the Wu family's 53 per cent stake in Wing Lung.

The purchase price would value the bank at more than $4.8 billion. That would be no small morsel for ANZ to swallow especially given the current pressures on its balance sheet - or the near $1 billion it set aside earlier this week to cover its worsening bad debt problems.

Allco at all-time crux

Banks led by Westpac and the Commonwealth have extended their deadline on approving a restructure as Allco Finance Group grinds away at developing a plan.

At stake are renegotiations on terms of $200 million in short-term debt, as well as a larger $900 million in debt from the same banking syndicate. The latter may become payable after Allco dropped like a stone through a $2 billion market capitalisation threshhold in January.

It is understood the stricken business continues to meet its interest payments in the short term, with banks expecting a swag of asset sales to substantially reduce their overall exposure.

© 2008 Sydney Morning Herald

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