The outlook for six takeover targets

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[This is a transcript of a video report]

There’s some very interesting share market situations that we are paying close attention to. Now the first of these is GrainCorp (GNC); it’s in our takeover target portfolio. Graincorp has had two bids from US giant Archer Daniels Midland. The GrainCorp board has rejected even the higher bid of $12.20 per share, plus a recent 35 cent per share dividend has been inadequate and materially undervaluing the company. ADM has bought just under 20% of GrainCorp now, so it is very committed to this transaction and I do think that a price of $13 a share is quite attainable in this particular takeover battle. We will have to wait and see.

Another one we’re paying close attention to is Echo Group (EGP). There’s a couple things going on with this; on the one hand you’ve got James Packer trying to convince the NSW State Government to give him a second casino licence for Sydney. On the other hand, both Packer’s Crown corporation and Malaysia’s Genting have applied to the regulators in both NSW and Queensland to increase their respective stakes in Echo to 25%. We’ve recently reduced our holding of Echo a little bit but I still think there’s a bit more to come in this particular situation. Genting in particular I think remains committed to taking a bigger stake in the company.

More recently we’ve seen some activity in the property trust market; General Property Trust (GPT), which has a near death experience during the global financial crisis has come out swinging. This time it’s made a a bid for about three-quarters of the assets of fellow real estate company, Australand. Australand at the moment is yet to respond to the bid, but GPT seems comfortable borrowing billions of dollars and presumably doing equity raising to buy other real estate assets and this must mean they see the market as looking fairly good over the next year or so.

Sundance Resources (SDL), this is one I think people should take away from; Hanlong is the bidder and they do not seem capable of raising the money to go ahead with this bid. Who knows, they might yet do it, but the signs aren’t particularly good.

Arrium (ARI) is a stock we’ve been in and out of a couple of times. We know that a consortium made up of Posco and Noble took a very close interest in this. They made an initial bid of around 75 cent and they lifted it to 88 cents. They’ve said they’ve walked away, but I’ve noticed that the Arrium share price has just gone above 88 cents and I just wonder is Posco and Nobel are still having a close look at this company.

And finally, Australian Infrastructure Fund (AIX); they’ve released a lot more details on the takeover of their assets by the Future Fund. The timing and the quantum of the payments is very well known now and there’s some extra franking credits that it’s thrown into the mix and we think that at around $3.16-$3.17 Australian Infrastructure Fund represents an excellent yield-to-maturity or internal-rate-of-return style of investment.

Anyway, Happy Christmas and I look forward to your company again in 2013.

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