Just Group Bid, Rio Rate Benefits

123jump.com Staff
31 Mar, 2008
New York City

St George, raised its rate on variable home loans by 0.1% to 9.47%. The bank blamed a rise in interest to an increase in costs in the wholesale markets. Australian billionaire retailer and former Coles Group Ltd Chairman Solomon Lew today launch unsolicited $900 million takeover offer for Just Group Ltd. Sinosteel unveiled its formal offer for Midwest at $1.19 billion, lower than expected offer of $1.49 billion.

[R]3:00AM New York, 7:00PM Sydney- St George raised its interest rate on variable rate mortgage loans. Centro Retail Trust was obtained a guarantee release. Just receives unsolicited offer.[/R]

Market Sentiments

ASX 200 index gained 0.1% or 4.6 to close at 5,355.70.

The Preliminary market turnover was 1.36 billion worth $5.29 billion, with 542 stocks up, 636 stocks down and 308 unchanged. The most traded stock was Junior explorer Admiralty Resources with 57.35 million shares worth $10.6 million.

Market Driver

Australian property trust, Centro Properties Group''s share gained 5.3%, after its Retail Trust was released from a $450 million bond guarantee.

Centro announced the release in a statement today. ""As previously advised to the market on 15 February 2008, Centro Retail Trust identified a guarantee for $450 million provided by a Centro controlled entity to holders of the Centro Properties Group''s US Private Placement Notes.

""The Noteholders agreed to release the guarantee upon the delivery of certain documentation by Centro Properties Group on or before 31 March 2008.

""Centro Properties Group advises that the necessary documentation has been delivered in a timely manner and accordingly the guarantee has been released,"" it said in the statement.

Centro Properties Group, the owner of about 700 U.S. shopping malls recently announced that had started talks with Australian creditors to extend its April 30 debt deadline.

Centro, which has lost 95% of its market value since December, is seeking its second debt extension as it searches for buyers for its assets to refinance $4.9 billion of debt.

Centro Retail''s share rose 9.7%.

Gainers and losers

Of the ASX 200 index stocks, APN/UKA European led the gainers with a rise of 21.3% followed by increases in Just Group Ltd of 12.5%, in Great Southern L of 12.3%, in Centro Retail Group of 9.7% and in AWB Ltd of 9.6%.

Of the ASX 200 index stocks, Challenger Finance led the decliners with a fall of 9% followed by losses in Gwa International Ltd of 6.4%, in Arrow Energy Ltd of 6.1%, in Nexus Energy Ltd of 6% and in Corp Express Aus of 5.7%.

Premier launches bid for Just

Australian billionaire retailer and former Coles Group Ltd Chairman Solomon Lew today launch a $900 million takeover offer for Just Group Ltd through his company Premier Investments Ltd, which has majority shares in Lew''s private company, Century Plaza Investments Pty Ltd.

Premier proposed to pay $2.20 cash and 0.25 Premier Investments share for each Just Group share, which value Just at between $828 million and $898 million. The takeover bid represents an implied premium of 16.9% to 26.8% to the Just Group closing share price of $3.52 on Friday, March 28.

Premier simultaneously bought 1.85 million shares, or 0.9% of Just''s register, in open market trade at $3.50 per share in what appeared to be a single block of stock although Lew told in a briefing today that he did not know who the seller was. He plans to retain Just''s chief executive Jason Murray in the role if Premier''s bid is successful.

Just advised its shareholders to take no action. ""The offer is unsolicited and there have not been any prior discussions between Premier Investments and Just Group on any proposal.

The Just clothing chain opened 65 new stores in Australia and New Zealand in the six months ended Jan. 26, increasing its network of outlets to 875.

Just share rose 13% while Premier fell 11%.

St George hikes rates

Australia''s fifth largest lender, St George Bank Ltd today announced that it has hiked its variable home loan rate by another 10 basis points to 9.47%. The hike is effective from Thursday. St George lifted its rate by 35 basis points to 9.37% earlier this month.

The bank in a statement said that the hike was necessary on rising costs of wholesale funding. All variable home loan interest rates will increase by 0.10% pa.

In addition the bank said its annual Standard Variable Rate would increase from 9.37% to 9.47%. The bank said the far reaching impacts of the US sub-prime lending crisis on global liquidity and the wholesale funding markets have not abated, and with the supply of funding remaining tight the market has seen funding costs continue to increase.

George Beatty, Acting Group Executive Retail Bank said; ""We have sustained increased funding costs for the last nine months, and we currently continue to absorb some of this increase along with our customers. However, similar to shop owners who increase prices to reflect the cost of
their goods, we also need to re-price loans to reflect the increased cost of funding those loans.""

This 0.10% rate rise equates to an increase in a monthly home loan payment of approximately $17 per month on an average sized loan of $250,000 over 30 years.

The St George announcement comes ahead of a meeting of the Reserve Bank of Australia tomorrow when it would again consider its position on monetary policy. The Reserve Bank raised the official cash rate by 0.25% at the start of the month to 7.25% - a near 12-year high for the central bank.

In a landmark speech last week, Reserve Bank governor Glenn Stevens said it was not realistic to expect big banks to restrain their rates hikes to the official cash rate increases in the current environment.

St George''s announcement Monday puts its home loan rates well above its major bank rivals, after Westpac Banking Corporation moved to match its major rivals, with a 10 basis point increase to 9.37%, effective from April 2.

Westpac''s move, driven by the higher cost of its own wholesale borrowings, came only three days after National Australia Bank Ltd lifted its home loan rate by nine basis points to 9.36%.

Commonwealth Bank of Australia Ltd, whose standard home loan rate stands at 9.32%, now has the lowest rate. ANZ Banking Group Ltd''s home loans carry a 9.37% interest charge. St George Bank shed 0.4%, Westpac fell 0.6%, ANZ shed 2.7%, National Australia Bank rose 0.6% and Commonwealth Bank fell 2.1%.

Woodside announces $5 billion investment

Woodside Petroleum Ltd today announced that North West Shelf venture today approved a $5 billion investment, its largest ever, in an offshore natural gas production platform, the North Rankin 2 project, to underpin supply commitments to customers in north Asia.

The project would involve a process where low-pressure gas would be extracted from two ageing fields by adding compression, enabling production to be extended. Woodside is the operator of the $20 billion venture. Production is due to start in 2013.

Woodside and BHP Ltd, BP Plc, Chevron Corp, Royal Dutch Shell Plc and a company controlled by Mitsui & Co. and Mitsubishi Corp. own 16% in the North West Shelf venture.

Woodside gained 1.9% and BHP fell 0.7%.

Highlands to commence Ramu nickel cobalt project

Highlands Pacific Limited today announced that its joint venture to for nickel and cobalt has formally commenced at accelerated construction schedule.

To date, approximately $200 million has already been committed on the project, with major infrastructure being constructed at the mine and processing sites in PNG, while operational plant has already been ordered.

The project financing from Chinese banking institutions will account for approximately 40% of the project cost, with a further 30% being provided by way of a shareholder loan from the Chinese syndicate involved in the project, the remaining 30% as equity by the Chinese syndicate.

With this financing from China, the project will have 30% equity and 70% debt - with the debt being repaid over 10 years.

Highlands has 8.56% interest in the Ramu project which would increase to 11.30% at no additional cost to the Company after repayment of the debt raised to finance the project has been completed.

Sinosteel issues bidder statement for Midwest takeover

The largest iron ore trading company in China, state-owned Sinosteel Corporation, today issued its bidder''s statement for its $1.19 billion takeover bid for iron ore miner Midwest Corporation.

Sinosteel urged Midwest shareholders to consider the all-cash offer against several risks that they could face if the offer was not successful, in a statement released today.

The move is in direct disregard of Midwest''s call on March 19 to raise the $5.60-a-share bid to at least $7 a share, valuing Midwest at $1.49 billion.

Midwest is yet to issue a formal recommendation to its shareholders but advised them on March 14 to take no action until it had an opportunity to consider the offer. Midwest said the current offer undervalued the strategic and intrinsic value of its five projects in Western Australia.

Midwest''s shares have closed higher than the bid price since March 19 when chief executive Bryan Oliver told a media teleconference that Sinosteel''s bid was timed to avoid paying a fair value for the target''s projects. Midwest share rose 1.7%.

Strike forces BHP to declare force majeure

Mining giant, Rio Tinto today hinted that it might save $913 million over the life of loans it secured eight months ago because of the rapid drop in U.S. interest rates. The world''s third-biggest mining company is paying ``a few percentage points'''' less on $40 billion of loans it took to buy Alcan Inc in August. The news was first reported in Bloomberg and on News.com Web site in Australia.

Chief executive Tom Albanese told reporters that Rio''s interest rate is pegged to the three month U.S. dollar London interbank or the Libor rate, which has more than halved since Aug. 30.

On August 30 the Libor rate was 5.58% and it fell to 2.697% on March 28, the lowest since January 2005 according to data compiled by Bloomberg. Rio Tinto assumed $45 billion to acquire Alcan based in Canada for $38 billion.

Rio''s share fell 1.1%.