Australian Stocks Fell, Rio Boosts Ore Target

123jump.com Staff
27 Nov, 2007
New York City

Australian stocks declined after the banks and financial services stocks faced another wave of sell-off. ASX 200 index lost 0.6% to close at 6,432.70. The eleven month long fight by Healthscope to takeover Symbion entered into another phase. Healthscope acquired 10% stake in the company through a swap agreement from Goldman Sachs. Rio Tinto laid out plans to boost production of iron ore to 600 million tons.

[R]5:00 AM New York, 6:00PM Sydney - The Australia index dipped 0.6% on the weakness in banks.[/R]

ASX 200 index declined 0.6% or 38.70 to close at 6,432.70.

National Australia Bank fell 1% after last week announcement that it may have to hold short term debt of Rams Home Loans Group Ltd. on its own balance sheet if the mortgage company fails to secure refinancing. Commonwealth Bank of Australia lost 0.9%, Australia and New Zealand Bank was lower at 0.6%.

Australia''s second-biggest hospital group, Healthscope today announced to the Australian Stock Exchange that it has entered into an equity swap arrangement with Goldman Sachs JBWere Capital markets Limited over 64.7 million shares in Symbion Health Limited for the 9.99% of issued share capital in Symbion Health at a price of $4.09 per share. The swap will be in force for six months, with each party having an early termination right.

For the last eleven months Symbion has been pursued by its two largest shareholders, Primary and Healthscope. The Symbion operates nearly 235 medical testing labs across Australia and demands for its services are growing as the Australian population grows older.

According to the company''s ASX release, Healthscope has the right to elect the settlement method that is to decide whether the settlement of the swap is by way of cash or physical delivery. The swap does not confer on Healthscope any rights in relation to voting in respect of any Symbion Health shares.

Healthscope believes that the swap will give it an opportunity to participate in the sale of Symbion Health. Meanwhile Symbion Limited today announced the termination of its Transaction Implementation Deed with Healthscope dated October 8th, with immediate effect.

Symbion said that a condition precedent to the Transaction Implementation Deed relating to a private tax ruling from the Australian Taxation Office would not be able to satisfy. As a result, the company said, the acquisition of its diagnostics businesses by Healthscope in the manner contemplated by the TID will not proceed.


The Healthscope board responded by announcing that it had cancelled the proposed Extraordinary General Meeting of Healthscope shareholders to consider the transaction which was scheduled to be held on Friday, 30 November 2007. Healthscope''s rose by 1.7%.

UBS AG believes Rio Tinto Ltd may boost its value by $31 billion by raising iron ore output and getting the better-than-expected cost savings from the acquisition of Alcan Inc.

Rio''s spokesman Gervase Greene said today about $26 billion will be needed to cover the cost of increasing iron ore output to the annual production target of 600 million tons. He added that about $10 billion would be required to boost the company''s ore production in the Pilbara region of Australia to 320 million tons from 220 million tons. The company produced a total of 133 million tons of the ore in 2006.

Analysts believe that higher iron ore production could add around $28 billion in the mining giant''s value. They believe that the cost savings from Rio''s $38.1 billion acquisition of Alcan may boost Rio''s value by $3 billion.

Rio''s Chief Executive Officer Tom Albanese outlined the plans yesterday as part of his attempt to repeal BHP''s unsolicited $129 billion all-stock takeover proposal, which he said undervalues the world''s third-largest mining company.

Analysts earlier this month indicated that BHP could afford to offer
$27 billion cash to sweeten the proposed three-for-one stock offer for Rio Tinto. They believe, BHP could pay as much as 71 pound or $147 a share for Rio and an offer of 63 pound may be high enough for Rio''s board to recommend the proposal.

ANZ chief executive Mike Smith today called for the abolition of the four pillars banking policy to allow Australian banks to merge in order to compete with a looming wave of competition from Asia. Smith told Trans-Tasman Business Circle lunch in Sydney today that the four pillars policy - which prevents the biggest banks from merging - had developed an inward-looking culture within the local banking system.

Smith said the election of the Rudd Government provided Australia with a fresh opportunity to abolish the four pillars policy and allow the banks to grow to a size where they can compete as ‘super regionals’.

The Australian dollar closed weaker today despite recover in the afternoon after Abu Dhabi sovereign fund bought 4.9% stake for $7.5 billion of Citigroup. At the close the Australian dollar was trading at $0.8793, down from yesterday''s close of $0.8833.

Of the ASX 200 index shares, AWB Limited led the gainers with a rise of 10.1% followed by increases in Ramsay Health by 3.4%, in Centennial Coal by 3.4%, in Aquarius Platinum by 2.8%, and in Queensland Gas by 2.7%.

Of the ASX 200 index stocks Monadelphous Group led the decliners with a fall of 5.1% followed by losses in Crane Group Limited of 5.2%, Macmahon Holdings by 5.8%, in Emeco Holdings L by 6.2%, and 8.2% in AED Oil Limited.

Preliminary stock turnover was 2.31 billion shares worth A$6.96 billion, with 444 shares up, 804 down and 382 unchanged. Excalibur Mining Corporation was the most active stock with 224.18 million shares traded at a value of A$9.56 million. Excalibur stock was up 13.16%.

In the other stocks, BHP Billiton was down 0.4% and Rio Tinto declined by 1.6%. In the energy sector Santos closed 2.6% higher and Woodside Petroleum added 0.1% and Oil Search was down 3%.

The retail sector closed stronger with Woolworths Limited adding 0.4%, Harvey Norman edging higher by 1.2%, and Wesfarmers Limited increasing by 0.4%.

Media stocks were mixed, with Seven Network up 1.5%, PBL added 0.7%, Ten Network lifted 0.4%, News Corp losing 1.7% and its non-voting scrip was down 31 cents to $22.69. Fairfax was down 1.9% and Telstra added 0.4%.