That’s it for Markets Live today.
You can read a wrap-up of the action on the markets here.
Thanks for reading and your comments.
See you all again tomorrow morning from 9.
Meanwhile in the bond market Australian government 10-year bond yields added 1 per cent to 3.7 per cent, while Australian government 3-year bond yields added 0.7 per cent to 2.7 per cent.
“I will be watching how markets react to both the US Federal Open Market Committee and BoE statements very closely,” Tyndall Investment Management head of fixed income Roger Bridges said.
“After some higher than expected US inflation figures earlier this week and recent ratcheting up in other price indicators, the FOMC may start to change its communication signals, or it may wait to see if the changes are temporary,” Mr Bridges said.
“It will also be interesting to see is the BoE makes further comment about the potential to bring forward rate hikes.”
Local shares briefly followed US markets higher when trading opened on Wednesday, before quickly falling away amid mixed cues from Asian markets in afternoon trading. Japan’s Nikkei and Hong Kong’s Hang Seng Index were higher when the ASX closed, but China’s Shanghai Composite Index moved lower after official Chinese data for May showed new-home prices fell in half the cities tracked by the government for the first time in two years.
On the ASX, it was a 4.6 per cent fall in the value of Australia’s biggest oil producer, Woodside Petroleum, that weighed heaviest. In their biggest daily drop since July, shares in the company slid to $40.90 after the company emerged from a trading halt after Royal Dutch Shell sold a 9.5 per cent stake. Shell will continue to sell out of its significant holding, subject to shareholder approval of a the pricing on the deal. In early analyst reactions, Macquarie and RBC Capital Markets both maintained “sell” ratings on Woodside’s shares.
And here are the best and worst - look at them iron ore miners fly!
Cover-More Group are the worse performers, as investors have an allergic reactions to the travel insurance website operator as it announced plans to expand into China.
Best and worst performers in the ASX 200 today.
A plunge in the share price of Australia's biggest oil producer and weakness in bank stocks has sunk the market, with the benchmark index closing at the day's lows after flirting with gains around midday.
The ASX 200 dropped 18 points, or 0.3 per cent, to 5382.7, and the All Ords fell 17 points to 5363.9.
Woodside dropped 4.6 per cent after majority shareholder Shell sold down its holding, while the banks suffered selling pressures ahead of the US Fed's policy meeting outcome early tomorrow morning.
Westpac was the worst of the Big Four, falling 0.9 per cent.
Metals and mining stocks advanced, despite BHP easing 0.2 per cent after Rio advanced 0.8 per cent and Fortescue 2 per cent.
Orica was up 2.7 per cent on news that it was pitching its non-mining chemicals unit to potential buyers.
Time for a quick spin around the region's sharemarkets ahead of today's local close:
- Japan's Nikkei: +0.9%
- Hong Kong's Hang Seng: flat
- Shanghai Composite: -0.7%
- Taiwan's TAIEX +0.4%
- Korea's KOSPI -0.6%
- Jakarta Composite -0.3%
- NZX 50: -0.2%
Newcrest Mining’s blatant flouting of the continuous disclosure laws is quite simply breathtaking.
The company’s senior management knew that their head of investor relations was briefing major investment banks that it would be forced to lower gold output for the year and anticipated $5.8 billion in write-downs a day before it was announced to the market.
The miner was even warned by the legal department at one of those analysts, Citibank, that it believed the company had breached the law, according to the agreement for Newcrest to pay $1.2 million in fines to the corporate regulator.
In other words, this was not a mistake, a misunderstanding or an employee off on their own folly.
This was a failure by Newcrest management, who were put on notice that the information they intended to share might fall foul of the law.
It also raises serious questions about the “independent report” prepared by Maurice Newman, now business adviser to the PM, who concluded that a sell-off in Newcrest shares was simply a “coincidence of timing”. His failure to uncover a “smoking gun” now looks farcical with all the evidence laid on the table.
Read more at the AFR ($).
There is often a tip.
Before many big mergers and acquisitions, word leaks out to select investors who seek to covertly trade on the information. Stocks and options move in unusual ways that aren’t immediately clear. Then news of the deals crosses the ticker, surprising everyone except for those already in the know. Sometimes the investor is found out and is prosecuted, sometimes not.
That’s what everyone suspects, though until now the evidence has been largely anecdotal.
Now, a groundbreaking new study finally puts what we’ve instinctively thought into hard numbers — and thetruth is worse than we imagined.
A quarter of all public company deals may involve some kind of insider trading, according to the study bytwo professors at the Stern School of Business at New York University and one professor from McGill University. The study, perhaps the most detailed and exhaustive of its kind, examined hundreds of transactions from 1996 through the end of 2012.
The professors examined stock option movements — when an investor buys an option to acquire a stock in the future at a set price — as a way of determining whether unusual activity took place in the 30 days before a deal’s announcement.
The results are persuasive and disturbing, suggesting that law enforcement is woefully behind — or perhaps is so overwhelmed that it simply looks for the most egregious examples of insider trading, or for prominent targets who can attract headlines.
The professors are so confident in their findings of pervasive insider trading that they determined statistically that the odds of the trading “arising out of chance” were “about three in a trillion.” (It’s easier, in other words, to hit the lottery.)
Coles has been declared guilty by the Federal Court of misleading shoppers with claims its breads and other bakery goods were "freshly baked" when that was not the case.
The ACCC launched proceedings against Coles mid-last year, accusing the supermarket giant of misleading consumers into thinking bread was made on the day at the store when, in some cases, the bead had been partially baked months before in overseas factories.
Federal Court chief justice James Allsop said Coles had breached three sections of Australian Consumer Law.
"There has been, in my view, a misleading representation available to be understood that these goods have been baked on the day of sale, or baked in a fresh process, using fresh, not frozen, product. Thus, in my view, there has been a contravention of section 29, 1a, also," he said in his judgement handed down in Melbourne today.
Morgans has upgraded its earnings estimates for Nine Entertainment following an overhaul of its debt facilities, resulting in a group of domestic and international lenders extending a new $825 million loan.
According to the broker the syndicated facility, split between four- and five-year tranches, will bolster the balance sheet and deliver a 9 per cent lift in earnings throughout 2015 and 2016.
Morgans, which has reiterated its “add” rating on the stock, says the chief benefits flow from the alterations to the interest calculations. Where these were previously based on gross borrowings, the new arrangement means interest will be calculated now on a net debt basis. “We estimate this change would deliver an $18m per annum saving on a like-for-like basis.”
Nine’s management has forecast the debt refinancing will deliver annual pre-tax cost savings of $20 million.
Morgans predicts consensus upgrades to the tune of 8 to 10 per cent are likely in order to reflect the improved balance sheet performance.
However the broker also warns the overhang on the stock from the pre IPO shareholders is yet to be resolved. “The escrow over Apollo and Oaktree’s shares – combined they hold 36% of the share register – ends with the release of the FY14 results. While we view this as a near-term overhang, the counter side of a sell-down is increased liquidity with an increase in index weightings likely.”
This MIGHT explain some of the slump in the sharemarket this afternoon...
China’s new-home prices fell in half the cities tracked by the government for the first time in two years as a slowing economy and excess supply deterred buyers.
Prices fell in 34 of the 70 cities last month from April, according to a statement by the National Bureau of Statistics today, the most since May 2012. In the financial center of Shanghai, prices decreased 0.3 percent from April, the first decline in two years, while they fell 0.2 percent in the southern business hub of Shenzhen.
“While at the trough of the 2011-12 price cycle 55 cities saw declines, the gradient of deterioration in the net balance in that phase was more sedate than the veritable tipping point” described in the new data, wrote Westpac international economist Huw McKay in a note today.
“The property market obviously is worsening,” Yao Wei, a Hong Kong-based China economist at Societe Generale, said. “The tricky thing is that the further developers cut prices, the [more scared] buyers may feel. They are holding a wait-and-see position for further discounts.”
China’s property industry, facing a surplus of empty units, is placing in jeopardy Premier Li Keqiang’s mini-stimulus policies aimed at arresting a slowdown that threatens his 2014 growth target. While the central bank last month called on the nation’s biggest lenders to accelerate the granting of mortgages, the government has refrained from broad-based easing of property restrictions imposed over the last four years to rein in prices.
“Property remains the biggest macro risk in the near term,” Zhu Haibin, Hong Kong-based chief China economist at JPMorgan Chase, wrote in a note to clients today.
The real estate industry accounted for about a fifth of China’s overall gross domestic product and further softening will bring additional downside risks to the economic outlook, Zhu said.
34 cities recorded monthly new home price declines in May. Source: Westpac
A bill that would have made California the first state in America to require warning labels on soft drinks was effectively killed on Tuesday.
Senator Bill Monning's bill failed on a 7-8 vote as his fellow Democratic lawmakers doubted whether a label would change consumer behaviour. It needed 10 votes to pass.
Certain sodas, energy drinks and fruit drinks would have included a label reading:
STATE OF CALIFORNIA SAFETY WARNING: Drinking beverages with added sugar(s) contributes to obesity, diabetes, and tooth decay.
It was developed by public health advocates using cigarette and alcohol warnings as a model. Representatives of the beverage industry argued that the bill was unfair by not applying to other foods and drinks, including lattes and chocolate milk.
Senator Monning says warning labels would be the most efficacious tool for educating people about the dangers of sugary drinks.
"Changing behaviour is the hardest challenge in the world of medicine," he told lawmakers before the vote.
"But you can't start to even make a commitment to make behaviour change if you don't have the information."
Australia's economy will lose momentum later in the year, not helped by a fall in consumer confidence after May's tough federal budget.
The Westpac/Melbourne Institute Leading Index, which indicates the likely pace of economic activity three to nine months into the future, rose in May but is still at a level low enough to indicate a below-trend rate of economic activity in the second half of the year and into 2015.
Westpac senior economist Matthew Hassan said the local economy is suffering a number of challenges.
"The sustained high Australian dollar in the face of falling commodity prices, the sharp fall in consumer sentiment since May and signs of slowing in consumer spending and housing markets," he said.
"This month's Leading Index highlights just how much these and other shifts have affected growth momentum with a slowdown likely over the remainder of 2014 and early 2015."
Woodside Petroleum's shares saw their biggest drop since last July after Royal Dutch Shell sold a 9.5 per cent stake in Australia's biggest listed oil and gas producer.
But the sell-down, advised to the market when Woodside shares were suspended from trading on Tuesday, has been met with a generally positive response from the market, with analysts pointing to the eventual elimination of the Shell overhang problem that has dogged the stock in recent years.
Also welcome to investors is the uplift in earnings and dividends per share for Woodside, once it completes a $US2.68 billion buy-back of a further 9.5 per cent of its stock from Shell as part of the two-part process.
The drop in Woodside's share price this morning was seen by some analysts as more of a reflection of the huge size of Tuesday's sell-down, which has mopped up appetite for the stock. However volume traded was also much higher than usual Wednesday morning.
RBC Capital Markets energy analyst Andrew Williams described the fall in the price as "mystifying".
"Some investors might have concerns. A selective off-market buyback was never going to appeal to everyone, but on balance, the positives outweigh the negatives," Mr Williams said.
Woodside shares, which were halted from trading on Tuesday pending the institutional sale, fell as much as $1.85, or 4.3 per cent, to $41. They recovered slightly through the morning to $41.33 around midday while remaining the single-biggest drag on the market in early trading.
Warren Buffett denied that he was planning to take Coca-Cola private, after another investor alleged the billionaire might be orchestrating a “sweetheart, insider deal” which sent the US drinks company’s shares higher.
David Winters, chief executive and portfolio manager of Wintergreen Advisers, which holds 2.5m Coke shares, wrote to the drinks maker’s board saying he was worried that Mr Buffett’s Berkshire Hathaway, Coke’s largest shareholder, might be planning to take the company private.
Mr Buffett told CNBC on Tuesday there was “absolutely no chance of that”. Coke shares closed up 0.6 per cent at $40.92 after earlier rising 1.3 per cent.
In March Mr Winters launched a public campaign against Coke’s employee stock plan, saying it was overly dilutive to shareholders and urging Mr Buffett to oppose it. Mr Buffett abstained from voting on the proposal and afterwards criticised it as “excessive”.
Mr Winters said he was raising his latest concerns based on media reports suggesting Mr Buffett may be working on a buyout of Coke with private equity group 3G Capital. Mr Winters suggested Berkshire and 3G could use their 2013 takeover of Heinz as a model.
“We are concerned that a similar type of sweetheart, insider deal for Coca-Cola could, in our opinion, significantly undervalue Coca-Cola and irreparably harm Coca-Cola shareholders,” Mr Winters wrote. He said he was urging the board to address potential conflicts of interest.
Investment guru Warren Buffett is absolutely, positively NOT going to take Coca-Cola private. Photo: Nicholas Kamm
Transurban chief executive Scott Charlton has flagged interest in expanding the company’s US network by adding tolled lanes to interstate highways near Washington DC.
Virginia’s Interstate 395, which runs into the US capital, had the potential to include toll lanes in the future, Mr Charlton said in an interview.
“The 395 is an interesting proposition because it intersects with two of our roads and it’s something longer term we would like to look at,” he told The Australian Financial Review.
Most of the US’s interstate highways are free for motorists to use, but a $US302 billion ($321 billion) White House transportation bill released in May aims to reverse a federal prohibition on most interstate tolling.
Maryland, which is next to Virginia, is also passing laws to allow more private sector involvement in roads, Mr Charlton said.
Transurban, which is holding a board meeting in Washington DC this month, owns two toll roads near the capital. It operates toll lanes known as the 495 Express Lanes on Virginia's Capital Beltway, and has committed to build toll lanes on the adjoining Interstate 95 in northern Virginia.
Transurban’s existing investments in the US have not all gone according to plan. The group was forced to disclose earlier this year that it would have to chip in between $US210 million and $US280 million extra to prop up the 495 Express Lanes, which opened in November 2012, because traffic flows were not strong enough to repay some $US430 million in debt.
Transurban expects to put in the full $US280 million, Mr Charlton said.
Foreign funds have been aggressively bidding for Australian infrastructure assets. Transurban needs to pay $7.05 billion to secure Queensland Motorways from competing consortiums that included several international pension funds. Mr Charlton said he was not worried that increased foreign competition for local infrastructure assets would bid up prices, saying it would boost liquidity and benefit long-term buyers and sellers.
JPMorgan’s “overweight” recommendation on Westpac is premised on key positives around sector-leading efficiency and sector-leading capital levels.
In considering whether Westpac can defend its efficiency lead, JPMorgan analyst Scott Manning has considered the extent to which Westpac’s ‘multi-brand’ strategy has simply turned into a “‘multi-branch strategy’ as St George risk tolerance and product has aligned with the broader Westpac group to leave a similar offering being distributed into an overlapping branch footprint.”
Nearly six years after Westpac’s acquisition of St George, Manning estimates that although cost synergies were met, the St George transaction only just became earnings per share neutral in 2013 financial year, “taking nearly double the three-year time-frame outlined at the time of acquisition.”
The operational headwinds for the acquired St George earnings base have been significant, Manning adds. He points to issues with capital, funding and risk.
Westpac is now “over the hump” of the St George merger. Manning has highlighted the potential for further efficiency through identification of duplication across different brands within the existing branch footprint.
Shares in Aquila Resources have jumped 7.2 per cent after it recommended a takeover offer led by Chinese steel giant Baosteel Resources valuing the company at $1.3 billion, in a surprise move after rejecting a higher rival bid (see post at 11:36).
Aquila shares rose as high as $3.37 and last traded at A$3.36, compared with the $3.40 per share offer from Baosteel and Australian rail operator Aurizon Holdings.
Chinese commodities trader CITIC Resources Holding has said that more than 100,000 tonnes of alumina stored at Qingdao port was missing, deepening fears that firms exposed to a metals financing scam at the port could face big losses.
The Chinese port, the world's seventh busiest, has been at the centre of an investigation looking at whether a private metals trading firm issued multiple warehouse receipts so that the same metal cargo could be used multiple times to obtain financing.
The alumina CITIC had been unable to secure has a value of around $43 million based on current market prices.
The probe has rattled global metals markets, reflecting market fears about business practices in China and worries that the probe could extend to other ports and prompt a crackdown on using metal as collateral for finance.
"The company has been notified that in the enforcement of the sequestration orders obtained by the group, the Qingdao court has been unable to sequester about 123,446 MT (metric tonnes) of alumina which the group has stored at Qingdao port," the firm said in a statement to the Hong Kong stock exchange.
CITIC Resources said it had title to 223,270 tonnes of alumina and 7,486 tonnes of copper stored at the port pending payment by and delivery to buyers.
The Chinese trading firm said it would conduct its own investigation to establish why the court had been unable to enforce its sequestration order in full.
CITIC said it did not have information on the current status of an investigation by Qingdao authorities and was not yet able to accurately assess the impact of the alleged fraud on the company.
The use of commodities as collateral to raise finance is common practice in China and is not illegal. But duplicating receipts to repeatedly mortgage the full value of an asset is fraud and could leave more than one creditor holding claims to the same collateral.
The board of iron ore hopeful Aquila has recommended that shareholders accept the $1.4 billion takeover bid from Baosteel and Aurizon, after attempts failed to execute an alternative deal with Mineral Resources, which last week swooped on a 13 per cent stake in Aquila.
Aquila chairman Tony Poli and the junior’s largest shareholder, with 28.9 per cent, will sell into the bid but “reserves his right to revisit this,” the company said.
The Baosteel-Aurizon all-cash offer, for $3.40 a share, appeared in danger after the entrance of Mineral Resources.
However, talks between Mineral Resources and Aquila appear to have fallen over.
On Monday, MinRes put an all-scrip off-market bid for Aquila, worth $3.75 a share, for the remainder of the company it does not own.
MinRes last week paid $197 million - or $3.75 a share - for a 12.78 per cent stake in Aquila in an on-market share raid.
“Aquila had discussions with MinRes concerning its proposal with a view to agreeing a recommended offer,” the companies said on Wednesday morning.
“Aquila and MinRes were not able to agree terms that were acceptable to both parties.”
It is not known if MinRes, a Perth mining services and mineral processing group, will accept the Baosteel bid, which would see it take a loss on last week’s share raid.
MinRes’ strategy drew the ire of Baosteel executives, who warned that if their bid failed China would not support Aquila’s West Pilbara project in any way.
At the centre of the jousting for Aquila is the junior’s majority stake in the greenfield $7.4 billion West Pilbara iron ore project.
Baosteel’s chairman Dai Zhihao wrote to MinRes boss Chris Ellison on Monday to make it clear that if the Baosteel bid failed, the West Pilbara project will have no support – financial or otherwise – from China.
Illustration: Rocco Fazzari.
The country's biggest financial institutions and bucket shops with financial services licences will be doing high-fives after a report tabled in Parliament by Coalition senator David Bushby recommends gutting financial advice reforms.
But this could be short-lived as the spotlight turns to the Minister for Finance, Senator Mathias Cormann, who has the power to accept or reject these recommendations.
The speculation on Tuesday night was that Cormann could come out as early as this morning outlining the new-look FOFA before the release of another report into the performance of ASIC and the inherent dangers of vertical integration as illustrated in the Commonwealth Bank financial planning scandal.
The talk is that he will reject a recommendation that would have given banks the green light to use their army of tellers to sell bank products and get up front fees and trailing commissions.
There is talk he might go further and introduce regulations that have the power to stamp out inappropriate behaviour.
But he is likely to accept the other recommendations, which include a dilution of the best-interests duty and the removal of the opt-in requirement, which means financial advisers won't have to seek client approval every two years to charge ongoing fees.
There has been a lot of lobbying to reject the general advice proposal not just by industry funds but also by the Financial Planning Association, which said: ''We are extremely wary of general advice business models which encourage a complementary sales model of financial product issuance and distribution.''
Put simply, it wouldn't be just the banks taking advantage, but it will open the floodgates to firms with an Australian Financial Services Licence (AFSL) restructuring their business to offer general advice so they can pay general advice commissions to their staff.
Gold miner Newcrest will pay $1.2 million in penalties over claims it selectively disclosed information to analysts, under a settlement proposed in the Federal Court.
Investors look to have reacted favourably to the idea of a settlement, bidding the stock up 1.3 per cent to $10.10 in a down market.
The corporate regulator has taken the company to court over the allegations it gave market sensitive information to a select group of analysts in a series of briefings leading up to an ASX announcement.
The claims relate to alleged briefings about an anticipated write-down in May 2013 following changes in its gold production.
The company's share price plummeted in the days leading up to the announcement, prompting an investigation by ASIC.
Newcrest said it failed to immediately disclose the information to the market, following a loss of confidentiality in relation to an expected write-down.
However it said the settlement did not mean Newcrest knowingly or intentionally contravened its continuous disclosure obligations.
''Newcrest takes its disclosure obligations very seriously and sincerely regrets the contraventions,'' Newcrest chairman Peter Hay said.
Investors can see that agriculture is an attractive sector.
Private equity investors are muscling in on food companies after being traditionally reluctant to invest in the sector, a business advisory firm says.
Takeovers are gaining momentum, with Australian agriculture and food businesses as prime targets, as international companies look for entry into Asia to capitalise on its rapidly expanding middle class.
A Grant Thornton study, which has tracked mergers and acquisitions in Australia's food bowl for the past three years, has found private equity firms are increasingly eyeing the sector.
The report comes as Europe's R&R, which is owned by French private equity firm PAI Partners, gobbled up ice-cream maker Peters for what is understood to be $400 million.
US private equity giant Kohlberg Kravis Roberts has also tried to grab a slice of the action, lobbing a $3.05 billion bid for Treasury Wine Estates, the maker of Penfolds.
''Five to 10 years ago, private equity was not going into agriculture opportunities because of the risk of primary production,'' Grant Thornton partner Cameron Bacon said.
''But the sector is becoming very attractive because of the strong growth opportunities in Asia.''
Woodside shares are back trading and are 3.6 per cent lower at the open and the biggest single drag on the market early.
The ASX 200 is down 12 points, or 0.2 per cent, to 5400.7, while the All Ords is 10 points down to 5380.7.
The banks are weaker, offsetting some gains in the miners, with Rio 0.9 per cent higher and Fortescue 0.8 per cent up as the iron ore price steadied overnight, although BHP eased.
The consumer discretionary sector is enjoying a bit of a bounce, 1.1 per cent higher, while utilities and listed property are the only other two corners of the market to advance.
The Australian dollar has hit a one-week low after some negative comments on the local economy from the Reserve Bank of Australia.
The local unit is trading at 93.32 US cents, down from 93.51 cents on Tuesday.
Late on Tuesday night, the currency fell as low as 93.34, its weakest level since June 9.
In the minutes of its June board meeting, released on Tuesday, the RBA said it was unclear how much the tough federal budget and expected declines in mining investment will impact the economy.
BK Asset Management managing director Kathy Lien said the Australian dollar suffered the steepest falls among commodity currencies overnight.
She said the market was looking for the RBA to issue an upbeat outlook for the economy, which would have pushed the Australian dollar up to its high for the year of 94.60 US cents.
"Unfortunately, the minutes were slightly more and not less dovish, resulting in a steep decline in the Australian dollar," Ms Lien said.
Most currencies lost ground overnight as traders bought US dollars ahead of a statement from the US Federal Reserve on Thursday morning, Australian time.
The Fed is expected to announce an upgrade to its economic forecasts.
"A forecast of higher inflation and lower unemployment suggests that the Fed is moving closer to achieving their goals and if (Fed chair) Janet Yellen acknowledges that in her press conference, the US dollar should extend its gains against all major currencies," Ms Lien said.
The consumer watchdog says it will now regulate the price telcos charge each other for text messages, hoping it will lower the cost for consumers.
The decision to begin regulating SMS "termination costs" follows an Australian Competition and Consumer Commission inquiry that received submissions from consumer groups who said consumers were being gouged by telcos.
In a submission to the inquiry, the Australian Communications Consumer Action Network said some Australians were paying unreasonable SMS prices because telcos inflated the price they charged one another to pass texts between networks.
"Telcos are currently setting whatever outrageous wholesale price they want and then that gets passed onto consumers," ACCAN deputy chief executive officer Narelle Clark said as the inquiry was underway.
"This level of profit margin is astronomical."
In announcing its decision to regulate SMS costs, ACCC Commissioner Cristina Cifuentes said it "should lead to lower SMS prices for consumers”.
“The ACCC is concerned that mobile network operators are able to keep wholesale SMS termination rates significantly above cost.” Ms Cifuentes said.
“The ACCC considers that this is having a negative impact on competition in wholesale and retail markets. In particular we are concerned that these rates are affecting SMS prices available to low income consumers."
Macquarie Telecom told the inquiry $0.000083 was the true cost for a telco to send an SMS. ACCAN multiplied this cost by two (to take into account the receiving cost) to arrive at $0.00016 as the total underlying wholesale cost of a single SMS to the telcos. If they then charge 15 cents for a single SMS it represents an almost 90,000 per cent mark-up for consumers.
The ACCC will now regulate the cost of SMS termination rates. Photo: Andrew Quilty
This just in:
Retail billionaire Solomon Lew has boosted his stake in department store David Jones to just under 10 per cent, signalling a clear intention to scuttle the $2.2 billion takeover by South Africa's Woolworths Holdings or demand a seat at the table.
Mr Lew's privately owned Australian Retail Investments announced this morning it had seized a 9.89 per cent stake in David Jones after buying 53.11 million shares worth around $200 million.
The notice of becoming a substantial shareholder has confirmed what most market watchers have suspected for many weeks, that Mr Lew had been buying shares in takeover target David Jones since May 9.
The huge stake now in Mr Lew's pocket could be enough to vote down the Woolworths takeover proposal when it is put to David Jones shareholders in 13 days time. Overnight Woolworths shareholders in South Africa voted in favour of the deal.
Mr Lew has been rumoured to be circling David Jones for months, buying up shares through various corporate vehicles and masking his presence on the retailer's share register through complex derivatives and other lending arrangements.
However, Mr Lew's decision this morning to come out of the shadows with less than two weeks until David Jones shareholders meet to vote on the $4 cash per share takeover must be a signal to Woolworths and the wider market that he has other plans for David Jones.
Mr Lew is a member of the BRW Rcih 200 list and is estimated to be worth more than $1.7 billion
These could include spoiling the Woolworths bid and then making his own grab for control of Australia's second biggest and oldest department store.
South African retailer Woolworths has secured shareholder approval to proceed with its $2.2 billion takeover of David Jones, but the acquisition remains under a cloud until ragtrader Solomon Lew declares his hand.
Woolworths shareholders overwhelmingly approved the acquisition and a $1 billion capital raising at an extraordinary general meeting in Cape Town on Tuesday, overcoming one of the major hurdles to the deal.
“What this does is remove some uncertainty for David Jones shareholders,” a spokesman for Woolworths said.
However, Woolworths chief executive Ian Moir, who has spent the last 12 months planning the takeover, will be unable to declare victory until David Jones shareholders approve the acquisition at a meeting on June 30.
The outcome of that meeting is now in doubt because Mr Lew, who has been a thorn in Mr Moir’s side at Country Road for 17 years, has bought a seat at the table by snapping up a strategic stake in David Jones.
Mr Lew is believed to have secured the voting rights to at least 5 per cent and possibly as much as 12 per cent of David Jones shares in a strategy aimed at either blocking the Woolworths acquisition, forcing Woolworths to buy out his 11.8 per cent stake in Country Road at a massive profit, or protecting his other retail interests, which supply stock to David Jones and Myer.
Market sources have ruled out a counter bid, as Woolworths’ $4.00 a share cash offer is considered fair value and Mr Lew does not have a history of overpaying for assets.
But Mr Lew has refused to engage with Woolworths or David Jones, leaving South Africa’s largest retailer and Australia’s oldest department store struggling to understand his next move.
US stocks rose, extending a two-day advance in the S&P 500 index, as smaller companies rallied before the Federal Reserve’s monetary policy decision tomorrow.
The S&P 500 gained 0.2 per cent to 1,941.99. The Dow Jones added 27.48 points, or 0.2 per cent, to 16,808.49. The Russell 2000 Index of smaller companies rose 0.8 per cent, its highest level in more than two months.
“Overall, you’re still in a market environment where the path of least resistance is up,” John Canally, an economic strategist at LPL Financial, said. “Another bump tomorrow could be the FOMC, although the outcome is largely already priced in.”
Equities fell earlier today as data showed the cost of living in the US rose more than forecast, reflecting broad-based gains that signal inflation will move closer to the Fed’s goal. The consumer price index increased 0.4 per cent, the biggest advance since February 2013, after climbing 0.3 per cent the prior month.
“Probably the most troubling number for investors is the CPI number,” Mark Luschini, chief investment strategist at Philadelphia-based Janney Montgomery Scott, said. “Both numbers put those inflation readings around the Fed’s target policy of 2 per cent. That to me suggests that the Fed, in looking at that, could say we run the risk of inflation being hot and could suggest pulling forward an increase of rates.”
A pickup in inflation lessens the threat of a prolonged drop in prices that hurts economic growth, giving Fed officials reason to continue to scale back their unprecedented bond-buying program. Continued hiring and faster wage gains will be needed to boost demand and enable consumers to cope with higher prices.
A Commerce Department report showed builders broke ground on 1 million US homes in May, a 6.5 per cent decline.
Local shares appear set for a flat start at the open following a cautious advance on Wall Street, as investors eye the US Fed monthly monetary statement tomorrow morning.
Here's what you need2know:
- SPI futures down 6 points to 5411
- AUD at 93.32 US cents, 95.35 Japanese yen, 68.93 Euro cents and 55.05 British pence
- On Wall St, S&P 500 +0.2%, Dow +0.2%, Nasdaq +0.4%
- In Europe, Euro Stoxx 50 +0.4%, FTSE +0.2%, CAC +0.6%, DAX +0.4%
- Iron ore up 0.3% to $US89.30 per metric tonne
- LME three-month copper up to $US6705 per tonne
- Spot gold down 0.1% to $US1270.61 an ounce
- Brent oil up 0.4% to $US113.38 per barrel
What’s on today:
- China: May house prices
- US: Federal Reserve meeting
Stocks to watch:
- Explosives giant Orica is quietly pitching its $1 billion non-mining chemicals unit to a select handful of potential trade and private equity buyers
- CBA has upgraded Super Retail Group from an “underweight” recommendation to “neutral”
- Deutsche Bank has maintained its “buy” rating on Echo Entertainment, while increasing its valuation by 15 per cent to $3.80 a share