Goodbye Jamison As Squirrels Get Backing

Sydney Morning Herald

Wednesday August 14, 1991

MARK WESTFIELD

Chris Corrigan would not have enjoyed reading on his Reuters screen yesterday the news that the AMP Society and National Mutual Life were supporting in principle the Australian Independent Newspaper group in its proposed bid for the Fairfax group.

Rival bidder Tony O'Reilly will not be over-pleased either, but the news does not spell the end of his bid as it does Corrigan's. It makes it very difficult, however, and O'Reilly will be playing his best cards when he arrives back in the country next week.

Jamison and Corrigan had been counting heavily on the support of the AMP and NML to add credibility to the proposed bid by the cash box.

While these institutions have not committed themselves irrevocably to the Squirrels, they are unlikely now to switch their allegiance to Jamison.

Importantly, the AMP and NML can sign their own confidentiality agreements with the banks and do their own due diligence to determine precisely what price they are prepared to support.

It places pressure on the Tourang Ltd partnership of Conrad Black and Kerry Packer to produce an offer so finely pitched it will be even more attractive to the institutions than the price they dictate for AIN.

Jamison's main problem has been its high level of current foreign ownership. On top of the 32.7 per cent held by the Monaco-based AFP Group, it also has the UK Equitable Life group and the French Indosuez group as shareholders. Its foreign equity would exceed 40 per cent.

If Jamison looked dead in the water a fortnight ago when it bought Freedom Furniture, then it is in a late stage of decay in terms of its Fairfax intentions.

AIN moves alongside Tourang into favouritism for Fairfax. The Squirrels, as AIN is also known, may even have their nose in front as they can co-ordinate their offer with the country's two largest institutions.

The prize is the Fairfax publications, The Sydney Morning Herald, The Age, The Australian Financial Review, The Sun-Herald and the BRW magazine group. Fairfax went into receivership last December when it breached loan covenants relating to its pre-interest earnings.

Black-Packer's Tourang Ltd bid is being underwritten by Ord Minnett (and ultimately Westpac Banking Corporation) so it can go into negotiations without having to obtain commitments from fund managers as do its rivals. If it gets the nod from Mark Burrows, who is advising the Fairfax banks, then it can go to the market for support and can expect to get it. If it fails, then the underwriting will not be required.

Tourang has the additional attraction of having the disgruntled Fairfax junk bond holders on side.

Now that Jamison appears to be out of the game, O'Reilly may be able to tempt across Bankers Trust and the State Super Board, which had earlier shown a preference for Jamison.

O'Reilly's camp says he has backing of about $250 million, so he needs a further $200 million to stay in the game. He will be scratching to win commitments of this magnitude. His camp had been hoping to get the NML on side.

In the end, the institutions will back the syndicate which pitches its offer finely enough to satisfy the banks, but not so high as to discourage the institutions.

Burrows and the banks are rubbing their hands in anticipation. After a shaky start to the tender process, they have every confidence of recouping the full $1.3 billion lending exposure, and perhaps a little more.

STRONG bidding out of London for TNT's convertible Australian dollar Eurobonds (see graph below) has fuelled speculation that Kerry Packer may be behind the buying.

The price of the bearer bonds has surged since Packer surprised the investment community on August 5 by disassociating himself from two articles in his Bulletin magazine critical of TNT, and declaring his intention to buy TNT stock.

The TNT share price has edged up 7c to last night's close of 84c since Packer's statement. Normally such a declaration of intent from an investor of Packer's stature would be expected to set the stock running.

Most of the buying of TNT's bonds appears to have come from two UK principal dealers which had short-sold and were caught by the sudden change in sentiment for the shares. The bond price has leapt from the recent low of $38(par value $100) to $53 with the yield plunging from 33.5 per cent to 23.27 per cent.