Failed ASX bid hits shareholders

Cameron BartramCountryman

On the grounds of national interest: those were the words Wayne Swan used to reject Singapore Exchange Ltd's takeover proposal for the ASX.

Looking behind the cliche , it is obvious the grounds for dismissing the proposal are two-fold.

Firstly, if the ASX was taken over Australia could kiss goodbye any hope of being an international financial centre in the future.

Secondly, it would have required a change in legislation to amend the existing 15 per cent single owner limit of an Australian financial institution, so by rejecting the proposal, Swan has avoided a potentially messy and damaging political debate at a time when the Government’s popularity is waning.

The loser in all of this are the ASX shareholders, with ASX shares trading as high as $43.89 on the day the takeover proposal was announced in October, and as low as $33.35 on Monday.

Despite the recent spate of natural disasters, perennial underperformer QBE has announced insurance profit before tax should rise by at least 30 per cent in 2011 and the company will maintain or increase its dividend.

Acquisitions over the past two years, including the purchase of Elders insurance arm and US insurer Balboa, are starting to bear fruits for QBE with the company’s share price rising to above $19/share for the first time since June 2010.

Construction group Leighton Holdings has cut its profit guidance for the third time in 12 months, saying it now expects to post a loss of $A427 million for the full year. Previous guidance had the company on track to make a profit of A$426 million.

On top of this the company has announced plans to raise $757 million in new capital at $22.50 a share, a steep discount to the current share price of $28.94 and well below the 12-month high of $38.73.

The major write downs came from civil construction projects including the Brisbane Airport Link and Victorian Desalination projects, plus investments in its joint ventures in the Middle East.

This announcement appears to be a ‘clearing of the decks’ after the departure of long-time Leighton boss Wal King, to give new chief executive David Stewart a fresh slate.

Meanwhile, Wal King has found his way onto the board of mining services company Ausdrill, with the news sparking speculation that Ausdrill will look at buying a stake in Macmahon, of which Leighton currently holds a 20 per cent stake.

Market darling Sundance Resources announced the results of the definitive feasibility study for its West African iron ore project, with the headline number a capital cost of $4.6 billion to get the project up and running.

This is big biscuits for a company with a current market capitalisation of $1.3 billion and 40 per cent higher than the estimated capital cost from their prefeasibility study on the project. The market didn’t seem to mind though with the stock holding steady, closing on Monday at $0.485/share.

US listed Monsanto fell last week after the agribusiness giant reported a 15 per cent lift in second quarter profit as sales of seed and herbicides grew and margins improved, but missed analyst expectations.

Information contained in this article does not consider your personal circumstances. You should consult a stockbroking professional before making any investment decisions. Sentinel may hold positions in stocks discussed from time to time.

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