Lion Long Odds To Eat Coopers

Sydney Morning Herald

Friday November 11, 2005

Edited by Michael Evans

The brokers are reframing the market as the court cases go the way of the target.

It seems employing "half the lawyers on the East Coast of Australia" to fight a takeover battle just isn't enough to satisfy some people.

Lion Nathan chief executive Rob Murray said on Wednesday that a report the brewer was spending $10 million on lawyers to fight its hostile bid for Coopers in court was "wildly inaccurate" - but, no doubt, fighting several cases at once isn't cheap.

Judging by a research note issued yesterday, however, all the money and cheeky press releases in the world might not be enough to secure a Lion Nathan win.

CSFB removed a 25c option in its Lion Nathan share price target yesterday based on the recent court decision that allowed Coopers to remove Lion Nathan's pre-emptive rights from its constitution.

"We no longer think it is likely that Lion Nathan can secure 100 per cent of the company and attract synergy," the pessimistic analysts said, lowering their share price target to $8.75.

Lion Nathan shares closed at $7.55 yesterday.

Load of rubbish

Shareholders in waste handler Transpacific Industries no doubt walked away from this week's annual general meeting feeling pretty pleased about the profit upgrade announced to the market: net profit forecast of $47 million for the year to June 30, 2006, which is $10 million ahead of prospectus forecasts and $2 million better than analysts' forecasts.

Outlined to the AGM was news of a New Zealand acquisition, a good-sized business with 150 employees, coupled with news that memoranda of understanding have been signed for expansions into water treatment and contaminated soil, with other expansion plans also afoot.

Not surprisingly, the news had a positive effect on the share price, lifting it well clear of $4 and pulling it out of a downtrend.

Yet there has been no word of the cost of the New Zealand acquisition, nor how much the new memoranda are likely to cost the company in additional capital demands.

A stronger share price may give directors some extra currency to play with if they are planning to issue shares for any of these moves but, at the least, more detail would be useful.

Roll out the cliche

Mayne's new boss Thierry Soursac is making the right noises ahead of stepping into the role as head of the global pharmaceuticals business in a demerged company.

"Mayne will not be a passive player in industry consolidation," Soursac said in a statement. "Mayne can participate proactively by building on its core strengths. There are many opportunities." Ho hum.

But he warned it's not all roses in the coming years.

"Mayne has a few good years in front of it but the next wave of patent expiries may not be as rich for generics companies as those in the past," Soursac said.

Mayne shares rose 20c to $5.64 yesterday.

New Diddams toy

You know the next tech boom is under way when start-ups like Mooter start lining up for a public listing. The Aussie company is asking for up to $8 million (but no more than that) to help kick its paid search listings business into gear.

At 65c a share this would value the company, which had negligible revenues last year, at just under $21 million. But there is the requisite tie-up with one of the big boys - the recent Yahoo! acquisition Overture - to help bolster Mooter's credibility.

So what's the difference between these guys and LookSmart, another player in the paid listings game which has struggled for relevance after losing Microsoft as a major client?

For starters, the Yahoo!/Overture interest stems from the fact that Mooter's service supports double-byte characters. This means that it can handle the complex language requirements of major Asian markets like Japan, China and Korea.

Mooter chief executive John Diddams said the money raised would be used to capitalise on this commercial advantage before rivals caught up.

If Mooter follows the path of other Australian tech success stories, the end result for investors could be a buyout by a US tech giant, maybe its current business partner Yahoo!

Until then, the $8 million that Mooter is asking for will be enough to fund its operation for two years, which was its initial timescale to becoming self-funding.

But after signing a further three-year agreement with Yahoo! last week, Mooter expects to reach cash-flow break-even before the end of next year.

The share offering closes next Friday and the stock is expected to commence trading on November 29.

Kimberley diamond

Kimberley Diamond is rapidly turning the bling-bling into a cash register's ka-ching.

With production to rise from 120,000 to 700,000 carats a year by the middle of next year, Citigroup thought it worthy of a 28-page research note to herald the occasion and begin coverage of the $360 million company yesterday.

Under the heading "Why you should own this stock", analysts dropped the handy fact that eight out of 10 brides in Shanghai are now receiving a diamond ring at their wedding.

As Australia's second-largest diamond producer behind Rio Tinto's Argyle mine - and more importantly, a producer of expensive gem-quality yellow diamonds - Kimberley is well-placed to earn $5.2 million next year, a darn sight better than the $2.8 million loss it bunged on this year.

Institutions have been piling into the stock in recent weeks, helped initially by a positive RBC Capital Markets research note issued in September. AMP, Commonwealth and Merrill Lynch all now rate as substantial holders.

Kimberley shares closed 4c higher at $1.385 yesterday, up 39 per cent since early September.

xchange@smh.com.au