Talk Of Nab To Dump Uk Banks

Sydney Morning Herald

Wednesday May 24, 2006

Edited by Michael Evans

If the bank's thinking of doing an AMP then its timing may be a bit off.

THERE'S renewed speculation that National Australia Bank may be looking to offload some of its UK assets.

The speculation stems from France's Credit Agricole saying it is evaluating a potential bid for UK bank Alliance & Leicester "among others".

That's sparked whispers NAB is a seller of its remaining UK banks, Clydesdale and Yorkshire.

Macquarie Equities analysts reckon that the renewed speculation "seems premature".

Macquarie acknowledged that after the rebound of NAB's UK earnings (up 9.9 per cent over the past six months following more than two years of declining earnings) speculation has increased NAB may leverage these results and sell its remaining UK banks.

They think "the timing of any such action is later rather than sooner".

Management said at its recent first-half result: "We're delighted with the UK's turning around ... we think we are a natural owner of the UK businesses, there are synergies we get between the businesses ... we think we can run that business well."

Deal gets worse

The competition regulator is today expected to pass judgement on the Australian Stock Exchange's merger with the Sydney Futures Exchange.

But Goldman Sachs JBWere analysts have questioned the value of deal, pointing out that when it was announced in late March, the terms represented a 21 per cent premium to SFE's then trading price.

"The merger announcement implied a bid price for SFE of $16.93 (based on ASX's average trade price from March 10 to March 21). Since then, ASX's share price has come back a long way, pulling the implied bid price for SFE all the way down to $14.94," Goldies said.

The current share price "indicates that the market sees some risk to the deal proceeding.

"More than half the premium being offered to SFE shareholders has effectively been eroded. The current price of ASX only represents a 9 per cent [and] 13 per cent premium to SFE's value-weighted average price over the fortnight/month leading up to the deal," Goldies said.

"SFE shareholders have a right to feel quite aggrieved (giving up control plus providing ASX with considerable synergies for what is now a fairly modest premium)."

Goldies expects the ACCC to pass the deal while imposing some price monitoring.

Betcorp untroubled

Online betting shop Betcorp may be racking up successes on the stockmarket at the moment but the association with its founder, convicted racketeer and US fugitive, Billy Scott, is never far away.

The US courts released documents last week which reveal new charges have being laid against Scott, Worldwide Telesports, the business he founded which now forms the core of Betcorp's operations, and a former employee.

The 12 charges of conspiracy, money laundering and failure to disclose foreign financial accounts is the latest tactic of the US Department of Justice to bring illegal internet gambling operators to justice.

The US Government's Wager Wire Act outlaws interstate or foreign companies from taking bets via the internet or phone but there is little the US Government has been able to do about operations like Betcorp, which operate from outside the US.

That may changing. The DoJ filed the case in April last year and is attempting to seize $US250 million ($332 million) that WWTS received from US gamblers under Scott's guiding hand. It has successfully seized $7 million from accounts in Guernsey in the English Channel.

No mention was made in the announcement about Betcorp, but the company has not been alarmed by the latest reports.

"It is a long-running historical issue," the spokesman said.

Scott is still Betcorp's largest shareholder.

BBC a lucky shot

Is it possible to find a Macquarie Bank business that's undervalued? Apparently so. Macquarie Communications Infrastructure Group was already a favourite with brokers and Monday's deal between UK broadcaster the BBC and MCIG-controlled Arqiva was seen as another positive despite the lack of financial detail at this stage.

"This was in our long-shot category of contracts for Arqiva to win, so adds materially to our valuation," UBS analyst Alex Unsworth said.

The brokers said its back-of-the-envelope calculations forecast a 41c per share valuation uplift although cash flow benefits won't start appearing until 2008.

UBS has a $7.15 price target, which sits comfortably above yesterday's close for MCIG at $5.61, up more than 5 per cent over the past two days.

Goldies has a $6.70 price target, which is expected to change once more contract details of the BBC win emerge.

Credit Suisse estimated that the BBC deal was worth 25c a share to MCIG based on revenues of #1.25 billion ($3.1 billion) and capital expenditure requirements of #350 million.

"We await further financial information before making a more detailed financial analysis," the broker said.

Hard to shift

Investor reaction to Multiplex's new office fund continues to be cautious, with JPMorgan saying its structure is similar to the Westpac Office Trust.

"That is, it is a listed syndicate that is highly leveraged and has a retail investor focus. This structure tends to be quite inflexible in that follow-on raisings are relatively difficult," JPMorgan says.

"We think this choice of structure partially reflects the fact that the Multiplex name still faces some issues with institutional investors."

xchange@smh.com.au

© 2006 Sydney Morning Herald

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