Fudge builds 10% stake in AJ Lucas

One of Australia’s richest businessmen, Paul Fudge, has snared a 10 per cent stake in AJ Lucas, extending his spread of shale and coal seam gas interests to Europe in the process.
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Mr Fudge, through his privately held Pangea Resources, pocketed $660 million from the sale of a coal seam gas permit to Origin Energy in 2009. Since then he has extended his interests in the sector, as well as ploughing money into buying racehorses and establishing a stud on the Southern Highlands, south-west of Sydney.

Earlier this week, a Fudge-controlled entity, Belbay Investments, disclosed a 9.9 per cent stake in AJ Lucas, the troubled driller and contractor, which has its foot on potentially valuable coal gas and shale assets in Europe.

At Lucas’ closing price on Thursday of $1.20, Mr Fudge’s holding is worth $33 million. Prior to the recent placement and rights issue, Mr Fudge held about 2 per cent of the company’s capital.

Mr Fudge was an underwriter of the retail investor component of AJ Lucas’ $148.8 million placement and rights issue which was conducted last month.

That raising followed the sale of a 25 per cent equity in its potentially valuable Bowlands prospect in the UK to local utility Centrica, formerly known as British Gas.

That reduced Lucas’ direct and indirect holding in Bowlands to 43.5 per cent, with Centrica to fund the next round of exploration on the Bowlands prospect.

The funds raised have helped recapitalise the Lucas balance sheet, which was under pressure since its drilling and contracting arms are losing money.

After making his money in textiles, Mr Fudge was an early mover into coal seam gas in Queensland, where he still has extensive acreage, as well as in the Northern Territory and NSW.

His NSW acreage is adjacent to AGL tenements at Taree on the mid-north coast, but onerous government regulation has locked much of this land up for the time being.

The share issue was priced at $1.20, a steep discount to its price of $1.60 prior to the issue, although since the issue was completed the shares have traded around the issue price.

Mr Fudge’s emergence with a major stake in AJ Lucas comes as the UK Energy Secretary said this week shale gas could cut domestic gas prices by as much as a quarter.

The original release of this article first appeared on the website of Shanghai Night Net.

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Industrial relations tension flare

Tensions in Australia’s coal sector are threatening to flare again, with Swiss company Glencore Xstrata on a collision course with unions over a plan to change the workplace deal at its Collinsville mine in Queensland.
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The plan stems from Glencore’s decision to dump Thiess as the mining contractor at Collinsville, and continuing efforts to return the mine to profitability for the first time in more than a year.

The decision to axe Thiess and bring mining operations in-house takes effect on September 1, and Glencore is seeking to use the changeover to reset the existing workplace arrangements for staff.

It has written to mine workers, saying that ”flexible workplace agreements without restrictive work practices” were ”critical to the mine’s future viability”.

The company said it believed it could continue to employ people who were ”committed to our future vision for the mine”.

”We have no set preference for any specific type of labour agreement but any agreement must be modern, flexible and without restrictions,” the company told workers in a letter.

The message drew a stern rebuke from the Construction, Forestry, Mining and Energy Union, which warned Glencore not to make veiled threats to the workers.

CFMEU Queensland district president Stephen Smyth said Glencore would need to renegotiate the workplace deal ”in the usual way” by talking to workers, if it wanted to changes.

”The industrial regulation at the mine will not be a matter of your preference. It is a matter of law and the law provides that the current agreement will apply,” he said.

The marginal nature of the coal industry is exacerbating an industrial relations atmosphere that was tense long before the industry came under financial pressure. BHP and Mitsubishi had strikes over the past few years at their joint-venture coalmines in Queensland, and unions remain far more involved in east coast coalmines than the iron ore mines of WA.

A Glencore official told a Senate inquiry in April that more than 30 per cent of Australian coalmines were unprofitable in the current economic conditions, although falls in the dollar since would have eased some of the pain.

The original release of this article first appeared on the website of Shanghai Night Net.

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Billabong debt holders threaten to pull plug

Billabong’s new chief executive, Scott Olivet, speaks to reporters in Sydney on Thursday. Photo: Steven SiewertBillabong’s senior debt holders are believed to have threatened to pull the company under unless it signed a deal that would involve a $40 million upfront payment.
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The US hedge funds Oaktree Capital Management and Centerbridge Partners, which bought a portion of Billabong’s debt from its senior lenders for a 10 per cent discount in the past month, put their competing proposal to the company on Wednesday. They submitted another plan on Thursday, which was also rejected by Billabong.

This was after the $294 million refinancing deal was signed with Altamont Consortium.

Insiders suggested it was inferior to the Altamont proposal and a plan from another suitor, the former US Billabong executive Paul Naude and the private equity firm Sycamore Partners.

”They didn’t even chase Billabong up the aisle, they knocked on the honeymoon suite,” a Billabong insider said of the Wednesday submission. The hedge funds were thought to have pressed Billabong to accept their offer or face the possibility of being cut off from accessing debt.

Billabong chairman Ian Pollard said Oaktree and Centerbridge’s proposal had a ”high level of conditionality” that the firm could not entertain.

”We had no piece of paper that had any numbers on it, let alone a proposal,” Mr Pollard said about the hedge funds’ earlier advances.

He said he would talk to Billabong’s lawyers about what responsibilities the board had to its shareholders if the pair were to submit another plan.

Billabong said late Thursday the second proposal was “not an offer that is capable of acceptance”.

Investors continued to cheer the Altamont deal, sending Billabong stocks 9 per cent higher on Thursday, to 36.5¢, after they soared 34 per cent on Wednesday.

Revelations about the last-minute scramble came as Billabong unveiled its incoming chief executive, Scott Olivet.

Mr Olivet, who was installed in the top job as part of the Altamont deal, said Billabong still had value in its brands. ”This has been a balance sheet story for too long,” he told a press conference in a Billabong store with Mr Pollard and outgoing chief executive Launa Inman.

”It’s time to turn this back to a brand transformation and a brand strength story, and a story of continuous business improvement. So it’s time to go on the offence.” Mr Olivet was coy about making changes to the company’s transformation strategy, which was rolled out by Ms Inman last year.

But the former Oakley executive said the new arrangement, which would see the consortium become about 40 per cent owners, would give Billabong the freedom it had been lacking to push through changes. He did not rule out further job cuts or store closures, but said most of the cost cutting would come from the supply chain side of the business.

Morningstar analysts said there was still too much uncertainty surrounding Billabong despite the refinancing deal.

The original release of this article first appeared on the website of Shanghai Night Net.

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Jobs to go as Aurizon looks to slash costs

Australia’s largest listed rail company, Aurizon, will strip more than $230 million in costs out of its business over the next two years, resulting in job losses and property sales.
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The company, formerly known as QR National, also announced that it would retain its small intermodal business that specialises in shifting container freight. Analysts had speculated that Aurizon would sell or close the business, which has struggled to turn a profit since it was established in 2007.

Chief executive Lance Hockridge sought to allay jitters about subdued growth in China – the final destination for most of the coal Aurizon hauls from mines to ports in NSW and Queensland.

”We certainly do not deny that there is a more subdued environment,” he told investors at a briefing.

”It is, in our view, a low-growth environment, but it is not a zero-growth environment. We just caution that while the world is more subdued … it certainly hasn’t come to an end from a growth point of view.”

Almost three years since it was floated, Aurizon will begin another round of cost-cutting aimed at shedding the last remnants of its past as a government-owned rail business.

The company would not put a figure on the likely number of job cuts, but revealed it would strip out $100 million in ”support costs” over the next two years – more than half of which would be from lowering its labour bill.

The cuts to its labour bill will involve a combination of laying off workers, not replacing staff who leave of their own accord, outsourcing work to third parties and reducing contractors.

Aurizon will also reduce real estate costs by up to $25 million, part of which will be done by selling property assets.

As part of the cost-cutting, Aurizon is aiming for more than $130 million in ”productivity improvements” over the next two years, including up to $70 million in labour savings.

The company has made clear that it is seeking greater ”labour flexibility” from renegotiating enterprise agreements over the next two years. All but one of Aurizon’s 19 labour agreements, which cover about 88 per cent of its 8000-strong workforce, will expire by the end of next year.

Shares in Aurizon rose almost 4 per cent to $4.55 on Thursday in response to the latest shake-up.

The original release of this article first appeared on the website of Shanghai Night Net.

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O’Brien’s DIY nightmare

It was a masterclass in coming clean as Woolworths boss Grant O’Brien (pictured) finally confirmed the open secret in the market: the Masters hardware chain is costing a little more than Woolies anticipated. After stripping out earnings from its Danks hardware distribution unit, Masters losses this year would come in at $157 million. That’s a lot of nails, screws and paint. O’Brien happened to be overseas for the bad news, but we’re assured it was on business.Number’s up
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Even so, Woolies’ move into telcos was short-lived. The dial-in number handed out to dozens of fund managers and stockbroking analysts for the earnings update turned out to be a residential number in the suburbs of Sydney.

Just who happened to be on the other end wasn’t picking up last night and the message bank was full. No doubt this was due to Australia’s finest retail analysts leaving their level-headed responses at not being able to get onto the conference call.Silver lining

While Masters’ sales had come in substantially short of its targets, one of Woolies’ hardware executives, Mark Burrows, was able to find a silver lining. For those who managed to get onto the conference call Burrows said the the Home Timber and Hardware brand – which is supplied by Woolies – has won the much-coveted Roy Morgan Hardware Store of the Year award.Pulling the plug

It was a big day for Woolies as the retailer finally lost its inner nerd. It officially severed ties with its Dick Smith business after Nick Abboud’s private equity play Anchorage Capital posted the remaining paperwork after last year’s acquisition of the electronics chain. Within minutes of the deal going through, Woolworths finance director Tom Pockett was reportedly seen sifting wildly through his desk looking for one of those medium-voltage-capacitor-fuses thingies.Options limited

Whoever prepares the ASX filings at Wilson HTM may not be too popular with senior management. Executives at the stockbroker will have to work that little bit harder to cash in on 2,600,000 share options after a paperwork glitch.

The stockbroker this week discovered the mistake in an Appendix 3B submitted in February, which wrongly said executives would be able to exercise the options at a share price of $0.31866. It should have said the ”strike price” would be $0.26886, in line with the offer letters given to staff. Despite the error, Wilson said it would stick with the higher strike price.On track

Aurizon’s fat controller, Lance Hockridge, caught the XPT from his base in Brisbane for a powwow with analysts in Sydney. Apart from announcing another round of cost cutting, Hockridge was quick to offer ”commiserations” to those nursing the Blues’ narrow loss to Queensland. For investors, the blow of another home defeat was softened by the promise of at least another $230 million in savings.Clash of titans

Spotted at ANZ Stadium for the State of Origin clash was Manly supporter Tony Abbott and chief cane toad Kevin Rudd. NSW boss Barry O’Farrell was getting privatisation tips from Lazard investment banker John Wylie.Locked in

Still on sport, CBD may have put a few offside on Wednesday with an item on new Lion boss, Scottish-born Stuart Irvine, choosing a team. Rest assured, your fill-in CBD columnist is a fan of the round ball, too, and has already locked in this year’s membership for the Western Sydney Wanderers.

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The original release of this article first appeared on the website of Shanghai Night Net.

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