All but married would have to be the bottom line after the market reaction to the news that Wesfarmers would pay fully franked dividends of more than $2 a share ($1.50 in 2006) for at least two years, and would be giving Coles Group shareholders flexibility to mix and match the proposed offer.
Coles shares jumped 62c to $14.69 and Wesfarmers shares leapt $1.41 to $41.38 a share, capping a strong recovery from the lows in last week's big sell-off and putting the merger back on track.
But that will be tested once again by today's sell off after world markets tanked Thursday night, our time.
Of course, it is hard seeing WES shares bounding away to over $45 and carting the value of the deal back to the $21 billion mark, but things lookbetter for the fate of the biggest Aussie merger in history.
According to an "ownership review update" issued yesterday by Coles chairman, Ric Allert, WES will now offer a "mix and match" proposal to Coles shareholders, which it claims will enhance the scheme of arrangement merger proposal the company announced on July 2.
There won't be any change to the overall funding mix of the offer, which the Coles board has been pushing for, before considering the scheme documentation due for release midway through mid next month.
Wesfarmers says Coles shareholders would be able to increase the scrip or cash component of the offer.
It also said it expected to be able to pay dividends of more than $2.00 per Wesfarmers share for fiscal 2008 and 2009.
The value of the Wesfarmers' bid, originally valued at A$21 billion, had dropped in recent weeks following the sharp retreat in Wesfarmers shares.
About 75% of the proposed acquisition is being funded by Wesfarmers shares, which will give shareholders significant capital gains tax rollover relief.
The statement read:
"Coles Group Chairman Rick Allert said that Wesfarmers' announcement confirmed the dividend uplift available to Coles shareholders as a consequence of the proposed transaction.
"Wesfarmers' intention to pay fully franked dividends in excess of $2 per share for the 2008 and 2009 financial years represents a significant uplift in prospective annual dividend income for Coles shareholders.
"Mr Allert said that the Board would consider the proposal put forward by Wesfarmers to enable shareholders to mix and match scrip and cash components of the offer as part of its overall assessment of the scheme of arrangement.
"Mr Allert said that the Board would continue to monitor the impact of Wesfarmers' share price on the value of the proposal before finalising its advice to Coles shareholders.
"The scheme implementation process is progressing to schedule with the release of the scheme booklet expected by mid September. It is currently anticipated that the shareholder meeting will take place on 25 October 2007."
Coles knows WES is its only option.
………..
You have to admire the cunningness of Brambles and its advisers, UBS.
They've taken the sneak attack by unlinked, but matey companies, Toll Holdings and its spin off, Asciano, and turned it against them. Thismakes it almost impossible for either company to get anything from Brambles by force of financial clout.
Brambles' shares bounced higher yesterday, taking the company's market cap well past $18.4 billion and making it more expensive for Asciano with its 1.76% stake and Toll with a stake of around 0.7%, to remain in the game and competing. BXB shares finished up 24c at $12.97 on more than 17.6 million shares.
That strength will be tested today in the market.
By disclosing the unwanted entry into the register and attempting to get a seat at the table by Asciano, Brambles and its advisers have raised doubts about the strategy of the two companies, and raised questions about whether they are acting in concert, which they cannot do under the terms of undertakings with the ACCC.
Asciano, which is debt ladened and just can't afford a significant purchase, will be feeling the strain financially if this continues for much longer.
No matter what the BXB share price goes to, AIO's parcel is costing it interest charges on around $276 million. AIO is one-third the size of Brambles and has interest cover of 1.6 times, which is enough to frighten even the most gung-ho analyst or rating agency if allowed to persist.
It is basically an infrastructure utility, not a growth machine, and yet it has plunged into Brambles like its one time parent Toll plunged into Patrick: on the sly with ambitions exceeding its ability.
But as we know, Toll won eventually because the ACCC laid down on the job.
Toll's presence is described by Melbourne-based apologists as a sort of accident, a result of 'great minds thinking alike'. Well might that be: Toll's Paul Little and AIO's Mark Rowsthorn are the founders and drivers of the empire that once was the complete TOL. They could have had Brambles down as a 'mark' before Patrick, or agreed upon it before the spin-off.
But now Brambles has done what some brokers were miserably moaning about: got the share price higher. It is up by over $1.60 a share in two days, or around 15%. And probably a merger/hostile bid would have to top $15 a share to be workable, which would push the price past $20 billion and into the realms of Coles Group values.
But Brambles has two world class businesses. AIO and TOL don't.
Asciano said it is seeking discussions with BXB "on ways to create value for all BXB shareholders". AIO stated that it is not currently working with Toll in relation to BXB and "has no intention of doing so".
Toll has advised BXB that it has no particular plans but declined to provide BXB with any assurance as to its future intention
