PROMOTERS of the billion-dollar divorce and property settlement proposal for Brickworks and Washington H. Soul Pattinson seem to have missed how finicky Tax Office chief Michael D'Ascenzo is about giving investors relief from capital gains tax.
Fund manager Perpetual's push to have the two investment groups, and their coalmining associate New Hope Corporation, undo their cross-shareholdings seems to have been running longer than the Survivor television series - with none of the players managing to find immunity from the ATO.
With a few billion dollars worth of assets potentially in play, the two sides have been trading shots over the past week on the back of a break-up plan devised by Charlie Green's Brisbane-based broking house Hunter Green.
Where Green thinks the tax effect on Brickworks would be minimal if it first raises some cash by flogging some of its 42.85 per cent holding in WHSP, and then distributing the rest to Brickworks shareholders on a pro rata basis - Brickworks' advisers beg to differ.
Brickworks actually sent a letter to shareholders last week saying that work done by PricewaterhouseCoopers calculated that instead of the $46 million in tax that Green theorised would be payable, the accounting group had come up with a $277 million cost.
That figure is roughly the 30 per cent of capital gains tax payable by Brickworks on the difference (some would call it profit) between the current $13.18 market price of its WHSP shares and the $3 a share that they cost way back when.
A cautious and sensitive PwC (do not mention the costly Centro settlement) spent some time vetting the Brickworks taking of its name before allowing it to go public last week. Insider understands the whole of PwC's advice is unlikely to be made public.
Perpetual investment chief Matt Williams may, though, get a look at it as early as today because Insider hears that he is meeting with Brickworks and its advisers to see if they cannot find a way of unravelling the group cross-shareholdings to mutual benefit.
Already this week those in the Perpetual camp have been arguing that for Brickworks to distribute its WHSP shares would be like Amcom Telecommunications' pro rata distribution to its shareholders last year of its 20 per cent stake in internet provider iiNet, where it did not trigger a capital gains tax (CGT) event.
Insider understands, though, that the problem with the argument is that the ATO only grants relief from CGT when the entity distributing the shares is deemed to control them.
In this case the feeling is that WHSP's cross-holding of 44.48 per cent in Brickworks would have the ATO shaking its head and treating the handing over of the stock as a ''sale''.
If that is right, Brickworks would be up for a tax bill that far exceeds the cash it has, quite probably triggering the sale of more assets and discomforting its bankers.
Buying back one another's shareholdings would seem to create worse problems, in Insider's view, with Brickworks needing $680 million to do that and WHSP $1.3 billion. While Brickworks' cost is wiped out by virtue of the cash it would get from WHSP, assuming the deals were done simultaneously, the latter would be $680 million out of pocket. And even though WHSP's balance sheet suggests that it has $1.6 billion in cash on deposit, that is really New Hope's money that it has been saving for a rainy day - or developing its coal assets.
Robert Millner, who chairs all three companies, almost had a solution when he put New Hope on the market last year - but had to kill off the sale in February without a bid on the table.
Had someone bought out New Hope at the mooted $6 billion asking price, then 60 per cent of that money - or $3.6 billion - would have flowed to WHSP (of which Brickworks' share would have been about $1.5 billion) and everybody would have been happier, most likely including the Tax Office.
That, though, is history and the simple fact is that Perpetual is seemingly way overweight with $806 million tied up in the three companies (almost 5 per cent of its total Australian equities under management by Insider's calculation) at a time of increasingly shaky financial markets - and no easy way to quickly cash it in without depressing the share prices.
GR finally reveals hit
GR ENGINEERING Services finally revealed yesterday afternoon that it has been hit with a $25 million legal claim hanging over its head from work it did on Allied Gold Mining's Solomon Islands mine - and the result will not be known until November.
Its shares fell more than 10 per cent to 93¢ on the news, dropping the company's market worth below $140 million, compared with the $345 million peak last July.
As Insider pointed out yesterday, GR Engineering had given no previous indication of any sizeable claim against it. The claim over its work on Allied's Gold Ridge mine seems to be claiming that the GR-designed and built plant and gold recovery circuit were inefficient.
It did, though, only land on May 18 (just two days after GR Engineering issued a profit warning), but was only admitted by the arbitrator of the case yesterday - hence the announcement.
It was a counterclaim to GR Engineering's own suit against the mine over $4.5 million of unpaid work. GR Engineering tried to argue yesterday that the reason it had said nothing specific before was because the legal action was a ''confidential'' matter, and that it had made ''general references'' to claims, and that a $1.5 million doubtful debt provision in last year's results related to this.
Insider thinks the claims do not wash, and that in the context of GR Engineering's size, even the initial $4.5 million claim was a material matter. The market clearly agrees.
Source: www.brisbanetimes.com.au
BP's Good Divorce Better Than a Bad Marriage - Moscow Times
BP surprised analysts Friday when it informed AAR, its Russian joint-venture partner in TNK-BP, that it would consider selling its 50 percent stake. Another surprise had come three days earlier when TNK-BP co-owner Mikhail Fridman announced his intention to resign from the joint venture. AAR, which has preferential rights to purchase BP's shares, has already announced its readiness to buy out the BP stake. The TNK-BP alliance has been plagued with serious troubles from its founding in 2003. In such cases, it is often said that a good divorce is better than a bad marriage.
Friday's announcement is just the latest chapter in a long history of internal conflicts between the two joint-venture partners. Today, TNK-BP does not even have a functioning board of directors, and the ongoing conflicts have made it difficult to agree on strategic plans for development.
At the same time, however, BP's investment in Russia has been its most lucrative in recent history. While BP invested about $8 billion to set up TNK-BP with AAR in 2003, it has reaped $19 billion in dividends since then, and the value of its stake has increased by more than four times. Moreover, after the disastrous BP oil spill in the Gulf of Mexico in 2010, it was the company's Russian partners that helped it through its financial difficulties by purchasing BP assets in Brazil and Venezuela at market prices.
The current escalation of the internal TNK-BP conflict is apparently a direct result of last year's heated quarrel, when BP wanted to enter into a partnership with state-controlled to gain access to Russia's Arctic shelf. But AAR felt the proposed deal had violated its exclusivity agreement with BP to develop other projects in Russia and challenged the BP-Rosneft agreement in the International Court of Arbitration.
To the surprise of many, then-Prime Minister Vladimir Putin did not intervene on the side of his ally, Deputy Prime Minister Igor Sechin, who had close ties to Rosneft. Putin let the terms of the BP-AAR investment agreement determine the outcome. In the end, the BP-Rosneft deal collapsed. For his part, Sechin rejected a bid by the AAR consortium to partner with Rosneft in developing the Arctic shelf. Rosneft later formed an alliance with ExxonMobil.
Most likely, if the TNK-BP divorce is completed, it could lead to the state strengthening its control over the oil industry. Only two domestic companies have the resources to buy the BP stake, valued at $30 billion to $35 billion. One is . Although its management structure is opaque, the company has the available funds to buy out BP's stake. The other purchaser could be Rosneftegaz, which owns 75 percent of Rosneft and 10 percent of Gazprom, and is closely linked to Sechin. Although Sechin is not a member of Prime Minister Dmitry Medvedev's new government, Putin wasted no time in signing orders that place an enormous part of the country's fuel and energy complex under his control.
Through Rosneftegaz's purchase of BP's shares in TNK-BP, the Kremlin could create a state-owned mega oil company along the lines of Gazprom, the state's giant gas monopoly. Sechin is also said to oppose the new privatization of the Russian energy sector. If Rosneftegaz expanded its market position by buying out the BP stake, it would provide yet another dangerous example of heavy government intervention in the economy and would likely spark a continuation of capital flight and a further worsening of the investment climate.
If the state is looking to increase its control over the oil industry, it will not allow AAR to snatch up the BP stake. On the contrary, the authorities will surely bring enormous pressure to bear on AAR to convince it to step aside. For example, the state has already had success in using its "environmental weapon" against BP, citing trumped-up charges of violations to force the company to pay almost $1 billion to clean up Samotlor, Russia's biggest oil field. Few in the government seemed to care that the site was heavily polluted during the Soviet period — long before BP entered the picture.
In another possible scenario, if Rosneft trades shares for the BP stake in the consortium, BP could use that roundabout approach to finally obtain its coveted access to the Arctic shelf through some form of partnership with Rosneft.
In any case, by announcing its readiness to leave the partnership with TNK, BP has showed how fed up it is with the problems of working in Russia's difficult business environment. At this point, state intervention in the deal is inevitable. Knowing this, it would make sense for BP to negotiate directly with the country's leadership. If BP plays its cards right, one visit to President Putin's office could be enough to solve all of its problems.
Georgy Bovt is a political analyst.
Source: www.themoscowtimes.com
Thanet beaches closed after sewage spill - BBC News
Thanet's beaches have gone from blue flag to red flag as cleaners work to clean the sand
More than 20 Kent bathing beaches have been closed to swimmers after sewage was discharged into the sea.
The closure of all beaches in Thanet was caused by a failure at the Southern Water Foreness Point Sewage Pumping Station after heavy rain.
Spokesman Jon Crooke said the pumping station discharged water which could otherwise have flooded homes.
Red flags are being flown at the beaches, many of which had recently won Blue Flag awards for cleanliness.
Visitors have also been told not to cross the high tide line.
The beaches have been closed since Monday but raw sewage started to enter the sea last Wednesday.
'Pumps blocked'Thanet District Council said they would stay shut for at least two days as a precautionary measure and it had been forced to act following more downpours on Sunday night.
Last month, it was revealed Thanet had more Blue Flag beaches than any other area in England.
“Start Quote
End Quote John Crooke Southern WaterThe pumps became blocked and to prevent flooding of the local properties the station then spilled out to the sea”
The awards recognise high water quality and facilities.
Beach cleaners and litter pickers are on site while officers from the council and representatives from the Environment Agency and Southern Water Services fully assess the situation.
RNLI Lifeguards are also informing the public of the situation.
Jon Griffin, senior environment officer at the Environment Agency, said it was carrying out an investigation and working with Southern Water and Thanet District Council "to reduce the impact of the spillages as much as possible".
"We will continue to monitor the bathing water quality over the coming days and will advise Thanet District Council accordingly," he said.
Southern Water said the pumping station failed following heavy overnight rain last Wednesday.
"The pumps became blocked and to prevent flooding of the local properties the station then spilled out to the sea," Mr Crooke said.
"Stations are designed to do this, if they become overwhelmed by water or through the failure of the works themselves, then the first thing they'll do is spill to the sea."
He said there was a possibility that more raw sewage could enter the water if there was further heavy rainfall but the aim was to get the beaches reopened to swimmers as soon as possible.
Source: www.bbc.co.uk
Who needs make-up! Sam Faiers shows a more relaxed side as she enjoys romantic pool rendezvous with beau Joey Essex - Daily Mail
By Holly Thomas
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She was spotted heading to the pool at the weekend looking as though she'd spent the entire morning getting ready for the sunbathing session.
So it was refreshing to see Sam Faiers looking rather more relaxed yesterday as she enjoyed a little downtime with her on-off beau Joey Essex at their Marbella resort.
The couple looked perfectly at ease with one another, at one point nipping off to grab a bite to eat without their TOWIE castmates.
In their natural state: Sam Faiers and Joey Essex were looking relaxed by the pool at their Marbella resort yesterday
Filming taking its toll? Both looked a little tired, but glad to chill out in each others' company
Sam didn't bother to wear make-up, and covered her bikini-clad frame in a comfy t-shirt now and then when the sun became too much.
She did get up to stretch her legs and show off her tanned figure at one point however, looking far more relaxed in flip flops than she had done in heels over the weekend.
Joey looked a little restless on the sun lounger, shifting around from time to time, but ever attentive when Sam leaned over to share a quiet word.
Tender moment: Sam used her boyfriend's chest as a pillow as they drifted off together
A little help? Sam used an unconcerned Joey as a support to sit up
He was briefly distracted when a couple of young female fans came over to have a chat, but quickly resumed his prone position once they had left.
Sam was clearly quite happy to sit back and take a break from her usual role of Essex glamour queen.
Over the weekend the blonde boutique owner was spotted filming scenes for the Only Way Is Essex looking more her usual self, wearing a slashed to the navel black swimsuit.
Laid-back look: Sam didn't bother with make-up, and covered up with a loose top when the sun got too much
Ready to take a dip? Sam appeared to be contemplating a swim, while Joey hardly seemed able to move
Getting fidgety: Joey seemed to have trouble finding a comfortable position
She accessorised with a huge, gold neck piece, featuring a large circle in the middle which hung off the main plate and nestling between her breasts, drawing attention.
Sam wisely protected her face from the sun’s rays at Sisu Club and Hotel in Puerto Banus, pairing her skimpy outfit with a giant black and white striped hat and large sunglasses.
A crocheted waistcoat and sky high clogs which elongated her legs completed the look.
Bit of a distraction? Joey looked a little weary as he sat up to greet a couple of young female fans
Ready to make a move? Both looked as though they were feeling the effects of the last few days in Marbs
Blending in with the crowd: Sam was sporting none of her usual TOWIE bling, with unstyled hair and no jewelry
The overall look was significantly more high-maintenance than her low-key poolside look yesterday.
But Sam's more casual appearance clearly wasn't an issue for Joey, who was undeterred in his attentions.
The pair made a touching display of their affections during the final episode of season five last week when Joey penned a heartfelt love letter to Sam.
Time to head for the shade: Even the sun-loving pair needed a break at one point
Joey made Sam laugh as he reminded her of memories they share from when they initially got together, and displayed his childlike handwriting.
His closing words were: 'I love you and you're the love of my life.'
Joey's gesture appeared to make up for the distress he caused when he was photographed getting into a cab with another girl.
Grabbed a bite: The enamored pair went to get some food without their TOWIE castmates
What a difference some slap makes: Joey and a made-up Sam out last Thursday
Dressed to the nines: Sam's look was much more high-maintenance on Sunday
Source: www.dailymail.co.uk
im so glad all of you are perfect!!!! give them a break, they are a young couple having some fun, not out to be publically slated.
- mCat, glasgow, 05/6/2012 23:50
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