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Woodside going well without Shell

PETER Costello’s decision to shepherd Shell out of its heavy tackle on Woodside brought a cyclone of criticism verging on the hysterical. The dollar was supposed to implode as foreigners everywhere tore up their plans to invest in Australia. Woodside shares were tipped to collapse and the financial world as we know it was expected to end.

The dollar did initially plunge, as some commentators predicted. They really must learn not to ask a foreign exchange dealer who has just sold millions of dollars short where the currency is going. In the event, it bounced off the ropes and came back looking relatively perky.

Likewise the Woodside share price, which briefly dived to $12.40 as the foreign short-term speculators ran with their tails between their legs. It was gratifying to see locals snapping up huge lines of stock that they discarded.

There seem to have been few complaints from among the 45,000 Woodside shareholders. At the current price of $13.20, and adding in the 60 cents special dividend that recently plopped in the post-box, Woodside is within cooee of the revised $14.20 offer.

The fact of the matter is that the Dutchmen muffed it. If Shell had made a plain vanilla $18 a share cash bid, as we suggested in this column before Christmas, they would have been a walk up.

The federal government at the time was eminently electable, and the umpire might have made a different decision.

Instead, they fiddled around in their purses for $14.80 and a too clever by half free-call option.

The much heralded injection of assets for Woodside stock never fired the imagination. Australia did not miss out on a $10 billion bid, as a chap on the television kept saying. Shell already owns 34 per cent of Woodside and was not really interested in getting more than 56 per cent to seize control.

They wanted the prize cheap. How cheap? In its present slightly slimmed-down form, Woodside is valued at $8.7 billion. That is a billion dollars less than either Western Mining, Woolworths or Wesfarmers. The shares of the energy group are selling at nine times earnings. Call me old fashioned, but that does not look dear. Hold on to your tickets. The race is not over.

The first international reaction to Woodside post the Costello kybosh came from ratings agency Standard & Poor’s. Raising the long-term rating on the company debt to A from BBB+ it said: “the rating upgrade on Woodside reflects its improved business profile, its cost effective operations, predictable cash flows from long-term domestic gas and LNG contracts, strong cash flows from new oil projects and its long reserve life”.

S&P said these strengths were marginally offset by the company’s limited geographic diversity and vulnerability to oil price and currency movements.

Nothing there to suggest that the Woodie’s double act of Charles Goode and John Akehurst should run up the white flag. Woodside is still in play.



Food for thought on carve up of Franklins

THE fire sale of dud supermarkets chain Franklins, which Hong Kong-based Dairy Farm is trying to get rid of, has sent the share price of boring old Woolworth’s mildly berserk.

Woollies touched $9.06 last week on prospects of buying about 80 Franklins stores, with foody analysts calling the stock up to $10.

Where were they when you could not give the shares away at $5.40 last year?

ACCC boss Allan Fels is in his element,

He may want to count all the items on the supermarket shelves before he approves the Franklins carve up.

All of this is of great interest at number 218 Bannister Road, Canning Vale, which is the address of our own little supermarket battler Foodland Associated. Foodland has already thrown its hat into the ring with JP Morgan, advisers to Dairy Farm, and said it would like please a clutch of Franklin shops in Northern NSW and Queensland.

Foodland has the Acton supermarkets here, the troubled Farmers Deka in New Zealand and nothing in between.

The company fancies itself as an east coaster.

It has taken to holding its annual meetings there.

Trevor Coates has been top man on the till at Foodland for six months. A former boss at the UK chain of German retail giant Aldi, he did a stint with Park ‘N Shop in HongKong which is the direct competitor to Dairy Farm. Good credentials. Coates now has the job of putting the oomph back into Foodland earnings.

Foodland shares have weakened recently to $8.50. They offer a yield of 6.5 per cent while we wait for Fels to dance his fandango.

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