Bumi Looks Much Bigger After Winning War

Sydney Morning Herald

Wednesday July 16, 2008

Edited by COLIN KRUGER

Indonesia miner on top after a seven-month battle for Herald Resources.

THE Indonesian miner PT Bumi has emerged victorious after its $563 million, seven-month quest to win the base metals developer Herald Resources.

In a surprise turn of events for a bidding war which had appeared nearly deadlocked, the Indonesian miner PT Antam and Chinese smelter Zhongjin last night decided not to extend their offer and to accept Bumi's bid for their holding in Herald.

In the latest round of a bidding war which saw several incremental price increases, Bumi offered $2.85, while Antam/Zhongjin stuck with its $2.80 bid. The Herald board had already agreed to pay a $5 million break fee to Antam/Zhongjin after it had recommended its offer before Bumi increased its bid again.

Herald owns the promising Dairi lead-zinc deposit in Indonesia, which has seen its development stalled due to its failure to obtain the necessary forestry approvals.

Bumi started the bidding war by launching a $2.25 offer in December, which was later trumped by a bid from Antam/Zhongjin after the pair were introduced by Macquarie. The Indonesian Government-controlled Antam holds a 20 per cent stake in the Dairi deposit and had agreed to sell the concentrate to Zhongjin as part of the deal.

Herald shares closed at 1c lower at $2.91 yesterday before Antam/Zhongjin pulled out of the bidding war. As of yesterday, Bumi held 19.93 per cent of Herald, while Antam/Zhongjin held 19.38 per cent which it has now pledged to Bumi.

Soaring Virgin

Toll Holdings' decision to offload its controlling stake in Virgin Blue has gained the tick of approval from analysts who believe it's the best course of action for both companies.

Shares in Virgin climbed for the second day in a falling market, closing up 6c at 58.5c. But Paul Little's Toll took the opposite flight path, falling 30c to $6.27. Toll's descent might have something to do with voices of discontent about whether its push into Asia is the right path for the transport company.

"The market is likely to remain unconvinced on this strategy until it sees proof of earnings stability in Asia and a clear enunciation of strategy," UBS said.

Nevertheless, analysts believe Toll's decision to part company is a positive for Virgin in the long term because it will increase the airline's liquidity.

However, the airline's share price could face selling pressure next month due to the special dividend.

And Merrill Lynch remains sceptical about Virgin's outlook.

"Near term we believe downside risks outweigh the positives of the announcement," Merrill said. "We retain our underperformance recommendation given we believe Virgin is currently losing money and the uncertainty that now exists over Virgin's future."

Few would dispute that it's a rocky ride ahead: top of the list of negatives for Virgin remains the deteriorating domestic aviation market.

Macau it hurts

Macau may have been painted as the new Las Vegas, but casino owners in the former Portuguese territory are being reminded that it does not come with the same laissez-faire governance as the famed US gambling mecca.

Shares in James Packer's Crown slumped to a record low of $7.85, down more than 5.6 per cent after Hong Kong's Ming Pao newspaper reported Chinese travellers will no longer be allowed to visit Macau on trips to Hong Kong using the same visa.

It makes Xchange wonder if the smartest money was made more than two years ago when Steve Wynn's Wynn Resorts sold a Macau gambling licence to James Packer for $US900 million - worth $US1.2 billion at the time.

In May, China limited travel by its residents to Macau, the only Chinese region where casinos are legal, to once a month as it tries to curb growth in the city's high-roller gaming market. The Chinese Government has subsequently cut the limit to once every two months.

"In Macau there's an intensifying policy risk from China," said Gabriel Chan, a Hong Kong-based analyst at Credit Suisse, in an interview with Bloomberg TV. "If Beijing wants to slow down Macau they'll do something to control it."

Seven stars

James Warburton and Peter Lewis have emerged as likely successors to Seven Media Group's boss, David Leckie, following a management reshuffle at the broadcaster yesterday.

Mr Warburton, head of sales for the Seven Network, has been promoted to oversee sales across all of Seven Media's divisions, including television, magazines and internet. Peter Lewis, chief financial officer, has had his role expanded to take on management responsibility of the broadcaster's capital city TV stations as well as its regional TV network in Queensland.

Industry observers say another possible candidate, the programming director Tim Worner, may have been sidelined in the contest. Seven sources dismissed the speculation, suggesting Mr Leckie was likely to serve out his contract, which expires in 2011.

Mr Leckie said the move would streamline Seven's management and boost the integration of advertising sales across its media platforms.

Oh Brother

Pimply teenagers are not the only ones lamenting the demise of the reality TV show Big Brother. The show has filled the coffers for Macquarie Leisure Trust, the owner of Dreamworld theme park on the Gold Coast which has been the home of the set for the past eight years.

News of the show's axing has seen the trust's price drop 10.04 per cent in two trading days, to close yesterday at $1.29. Analysts said it's not just when the show is airing that the park benefits, but most weekends and school holidays it also attracts curious sightseers who spend time walking around the "house" and buying souvenirs. To help offset the potential revenue decline, Dreamworld is spending about $11 million on a Mick Doohan motocoaster.

There is also more land next to the park that can be developed into new rides.

xchange@smh.com.au

© 2008 Sydney Morning Herald

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