F&N Takeover update

So an OEU (Overseas Union Enterprise) led consortium ( OEU and Farallon Funds), coupled with a collaboration with Kirin, is making a bid for F&N.

Quick notes,

14.7% F&N shares held by Kirin will be tendered into acceptance. (irrevocable undertaking)

Thresehold : 50% + 1 share acceptance by shareholders.

36.41% owned by TCC (Mr Charoen) already.

Price $9.08

Kirin will takeover the food and beverage units whilst OEU will takeover the property portfolio after the offer period.

I believe in either case, this will take a long time to solve as 36.41% is already held by Mr Charoen. He needs another 14.6%.

OEU will need another 35.4%. Time for the minorities to be the decider. So just hold on to your shares and sit tight.

My personal ramblings :

I am trying to think from Mr Charoen's shoes. Will he try to squeeze out more, ie make a counter bid and wait for the newly established partnership to outbid him 1 more?

I believe Mr Charoen should be very happy with his returns thus far. He would have made a handsome profit of roughly $170 million from accepting the Heneiken offer for APB.

If he accepts this bid for F&N , He will roughly make another $65-80 million.

I do wonder if there are any penalty on him repaying back his huge loan facility taken to buy the shares initially ( $2.8 billion )

In going through all the trouble, I tend to think Mr Chareon would not want this prized asset to slip quite so easily. He will most probably put in another counter bid.

Kirin has showed their resolved that they will only sell their stake to OEU, and buying back the F&B divisions from OEU.

I wonder if all this fails, will they build up a 20% stake to be a nuisance and demand to be paid at a higher multiple if Mr Chareon wants to get rid of them.

The OEU bid is funded with debt from Credit Suisse and Farallon Funds. Wonder how much more they are willing to pay up for this asset.

These 2 parties must have put in alot of work already for them to just walk away. I think even if Mr Charoen bids 1 up, they will still go in and fight for it.

I think there are more to come from both parties. Time to get my hands dirty, Entering trade.

Graincorp Rejects Takeover by Archer Daniels Midland Company

Proposal from Archer Daniels Midland (ADM) deemed to materially undervalue GrainCorp.

Hostile bid for Discovery Metals

(Reuters) - A private equity firm founded by Chinese billionaire Yu Yong has gone hostile with its A$824 million ($850 million) takeover bid for Australia's Discovery Metals Ltd (DML.AX) after the copper miner's board rebuffed a similar offer earlier this month.

Discovery's shares jumped more than 6 percent to slightly more than the offer price, indicating investors may hold out for a higher offer from CF Investments, which is 75 percent owned by Yu's Cathay Fortune Corp and 25 percent by China-Africa Development Fund.

The decision to go hostile after Discovery's surprise rejection of an initial bid has bolstered expectations that resource-hungry Chinese firms will seek more acquisitions in the sector, especially among companies that have promising projects in emerging markets.

"What the major institutional shareholders will or should do is go back to these guys and say: 'Give us an extra 10 percent and you can have it,' and that's what I think the current market price is reflecting," said Pieter Bruinstroop, an analyst at broker Octa Phillip.

CF Investments offered A$1.70 a share, 3 percent above Discovery's last closing price but 17 percent above its last trade before the initial offer was made public on October 4, adding to a string of small to mid-sized mining deals in Asia after a slide in metals prices made valuations more attractive.

Cathay Fortune, which already owns 13.7 percent of Discovery, is targeting the firm for its Boseto project in Botswana, near a central and southern African region that has attracted more than $10 billion in copper takeovers in the past two years.

The company has set a minimum acceptance condition of 51 percent, which means it only needs just over 37 percent support to go ahead with the deal.

China, which accounts for nearly 40 percent of global copper consumption, has been on the prowl for mining investments in Africa, South America and central Asia as it looks to feed ever expanding domestic demand for key commodities.

Discovery's shares touched a six-month high of A$1.76 after the news but later trimmed some of their gains to trade up 5 percent at A$1.732.

AFRICAN ASSETS

The hostile bid for Discovery stoked gains in other copper miners and explorers on hopes of more takeover activity, with Oz Minerals (OZL.AX) rising nearly 3 percent, and PanAust (PNA.AX) and Tiger Resources (TGS.AX) both rising about 1.3 percent.

Discovery rejected the offer earlier this month, saying it failed to reflect the value of its operations, expansion plans and exploration potential. On Tuesday, it told shareholders to take no action until they receive an official offer document.

"I think there is more value in it for the Chinese. It is a fantastic asset for them," said Octa Phillip's Bruinstroop, pointing to 200 million tonnes in copper and silver resources at Boseto and a large volume in mineralisation that has yet to be classified as resources.

Bruinstroop has a base case valuation of A$1.27 a share, but sees the company worth more than A$2 a share if its resources can be fully developed.

The company's rejection of the previous offer came as a surprise, as it was well above some analysts' valuations on the stock.

"The decision of the Discovery board to refuse access to due diligence and further engagement without any reasonable basis has prompted CFC's decision to bypass the Discovery board," said Yong Yu, whose net worth is estimated at $1.4 billion by Forbes.

For investors who bought into a recent capital raising at A$1.20 a share, the offer of A$1.70 would generate a 42 percent profit.

Cathay Fortune also owns 35.5 percent of Hong Kong-listed China Molybdenum Co Ltd (3993.HK), the largest molybdenum producer in China and the fourth-largest in the world.

It said the offer, which has already gained Chinese regulatory approval, will be funded by agreed term loans from China Development Bank Corp CHDB.UL and existing liquidity.

Chinese firms have been actively pursuing assets in Africa this year.

China-Africa Development Fund and China Guangdong Nuclear Power Corp agreed to buy Kalahari Minerals and Extract Resources for about $2.3 billion, gaining control of the Husab uranium project in Namibia.

State-owned China National Gold is considering a bid for the African unit of Barrick Gold Corp (ABX.TO), the world's No. 1 gold producer.

The interest in Africa coincides with a switch away from Australia and Canada, where asset prices have become more expensive.

Long project approval processes have also put off some Chinese investors, spurring the search for assets in emerging markets.

Citigroup (C.N) is advising Cathay Fortune and China-Africa Development Fund on the deal, and UBS (UBSN.VX) is advising Discovery Metals.

($1 = 0.9689 Australian dollars)