October 2, 2008 / 9:10 PM / 11 years ago

PRESS DIGEST-Australian Business News - Oct 3

Compiled for Reuters by Media Monitors. Reuters has not verified these stories and does not vouch for their accuracy.

THE AUSTRALIAN FINANCIAL REVIEW (www.afr.com)

Private equity players are pulling out of the A$800 million-plus auction of Group Danone’s BNEUR.PZ New Zealand-based Frucor Beverages business, leaving Coca Cola Amatil and overseas beverages groups in the race. It is understood the worsening market conditions since Danone initiated a strategic review of Frucor in August caused the withdrawal of private equity firm CCMP Capital Asia and forced a rival consortium led by Kohlberg Kravis Roberts and Merrill Lynch Private Equity to rethink the potential purchase. Page 51.

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Rio Tinto (RIO.AX) chief executive Tom Albanese has forecast a rebound in spot prices for iron ore, driven by continued demand from China despite the global economic crisis. Maintaining that China’s growth would remain ‘robust,’ Mr Albanese told the Melbourne Mining Club yesterday that ‘the real impact of the financial panic of this week is oversold and we will see some return to sanity.’ His comments came a day after the competition regulator decided not to oppose BHP Billiton’s takeover bid for Rio Tinto. Page 51.

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ACP Magazines, a division of media group PBL Media CMJ.AX , is proceeding with its plans to establish its own printing plant by 2011. It is understood PBL Media, which is saddled with a A$4.2 billion debt and A$450 million in annual interest payments, has been working on the plan for the past 18 months. Industry insiders estimate PBL Media will spend at least A$150 million on the printing facility. ACP’s current contract with its main printer, PMP, costs the publisher about A$80 million annually. Page 51.

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The first flight of V Australia, the long-haul service of Virgin Blue Holdings VBA.AX, will be delayed by more than two months because of a month-long strike at aircraft maker Boeing’s plant in the United States. Virgin Blue has seven 777 model aircraft on order from Boeing, with three of them close to completion. The carrier, which originally planned to launch Sydney-Los Angeles services on December 15, has promised to compensate or accommodate customers who have already bought tickets. Virgin Blue shares fell A0.5 cents to A36 cents yesterday. Page 52.

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THE AUSTRALIAN

The global credit crisis has fuelled speculation of consolidation in the Australian banking and finance industry. BankWest, the local subsidiary of troubled British bank HBOS - HBOS.L which is set to merge with rival Lloyds TSB - has emerged as a takeover target. Observers said yesterday the looming consolidation phase of the sector could involve Queensland-based group Suncorp (SUN.AX), bancassurance group and Bendigo Adelaide Bank (BEN.AX) . Meanwhile, the Commonwealth Bank of Australia denied rumours that it was set to make a bid for BankWest. Page 19.

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Iron ore miner Fortescue Metals Group (FMG.AX)has confirmed that an announcement last month to ramp up production capacity in stages instead of lifting it straight to 120 million tonnes a year by 2011 from 40 million tonnes at present was caused by the credit squeeze. Executive director of operations Graeme Rowley said yesterday while Fortescue, which began production in May, remained committed to its long-term target of 160 million tonnes, the credit crisis was ‘reducing our financial options - money out there is hard to get.’ Page 19.

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The chief executive of China-focused gold miner Sino Gold, SGX.AX Jake Klein, has called for greater personal-level assimilation of Chinese companies operating in Australia. ‘Australia sells a lot of raw materials to China, but in the ASX top 20 companies, there is not one Chinese director,’ Mr Klein told the Sydney Mining Club yesterday. He said Sino Gold, which runs the Jinfeng goldmine in southern China, had integrated senior Chinese staff and the Mandarin language into its operations in that country. Page 20.

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Queensland Mining Corporation (QMC) made a dismal stockmarket debut yesterday, seeing its shares close 60 percent down at A20 cents - the day’s worst performance on the Australian Stock Exchange. The Sydney-based copper and gold miner, which operates projects in Queensland’s Mount Isa/Cloncurry region, managed to raise only A$3.3 million in its initial public offer, falling well short of its A$15 million target. However, QMC had already raised A$20 million through private investors. Page 21.

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THE SYDNEY MORNING HERALD

Zinc miner CBH Resources CBH.AX has made a A$65 million hostile takeover bid for rival Perilya PEM.AX. CBH said the two-tiered, all-scrip offer was a ‘superior proposal’ to the bid it had planned earlier this year, but Perilya told shareholders to take no action. Both companies have seen their share prices slide recently because of falling zinc prices, but the possibility of a merger lifted Perilya’s shares yesterday by 16.7 percent to A31.5 cents, while CBH closed up 8.2 percent at A7.9 cents. Page 21.

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Online advertising technology company Mooter Media MMZ.AX, in which newspaper publisher Fairfax Media FXJ.AX has a stake, has warned it may be unable to continue as a going concern unless it is able to raise ‘sufficient funds…immediately.’ Technology developed by Mooter allows media companies to match advertisements with Internet content. Fairfax, which bought 19.9 percent of Mooter in 2005, said yesterday while it was ‘disappointed’ with Mooter’s problems, it’s stake was merely a ‘residual, passive investment.’ Page 23.

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Television and print media groups including Seven Network, SEV.AX Ten Network TEN.AX, Fairfax Media and ACP Magazines could be hit as major advertisers consider spending cuts in the face of the economic downturn. After electronics and furniture retailer Harvey Norman (HVN.AX) flagged a 20 percent reduction in advertising spending next year, food products group Nestle NESN.VX said yesterday it would switch some of its A$125 million marketing budget to online and direct. Credit Suisse CSGN.VX has forecast a 5.3 percent decline in advertising spending in the year to June. Page 23.

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Qantas Airways (QAN.AX) has applied to the International Air Services Commission for a two-year extension of its code-share arrangement with South African Airways for services between the two countries. The two carriers jointly had a 70 percent market share on the route last year, compared to the 12 percent share of main rival Singapore Airlines. Qantas flies five days a week between Sydney and Johannesburg and plans to start two new weekly services by mid-2009. Page 24.

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THE AGE

Australia has posted a A$1.36 billion trade surplus for August, only the second favourable month in the past 75 months. The figures, released by the Australian Bureau of Statistics yesterday, exceeded economists’ expectations of a much smaller A$200 million surplus. The positive trade result was driven by higher exports of commodities including coal and metals, which lifted overall exports by 6 percent, and a 2 percent decline in imports. But a St George Bank SGB.AX analyst warned ‘exports may come under pressure from a slowing world economy.’ Page B1.

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Observers have backed the view of Australia and New Zealand Banking Group (ANZ.AX) chief executive Mike Smith that local banks remain reliable in the face of the global financial crisis. Mr Smith last week cited the capitalisation, liquidity, profitability and management of Australian banks to claim they were ‘among the safest in the world.’ His statement followed a review by the Reserve Bank of Australia that reached a similar conclusion. Australia’s four largest banks are among just 18 in the world to be rated AA by Standard & Poor’s. Page B1.

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The Australian Competition and Consumer Commission has launched action against 28 parties linked to telecommunications companies (telcos), alleging dubious contracts and misleading conduct. The parties include entrepreneur Tony Hakim and individuals and firms associated with him, and finance firm Australian Integrated Finance. The consumer watchdog alleges ‘free’ equipment the parties were offering with bundled services was actually supplied under rental deals by finance firms unrelated to the telcos. Page B3.

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