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Lateline Business -

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(generated from captions) If it's best for it to be flown by

JetStar, it will be flown by

JetStar. If we believe Qantas is

better suited for it and we believe

that Qantas can continue to get its

Qantas. cost down, it will be flown by

Straight to the markets now.

Coles Myer takeover speculation And stocks have surged on that

company results. and some better-than-expected The All Ords rose nearly 2%. The ASX200 having a similar rise. today. The main Asian markets were lower slightly on profit-taking. In Japan, the Nikkei slid back with dipping oil stocks a factor Hong Kong's Hang Seng fell, opening number in about 20 minutes. and we'll bring you the Dow It starts trading at 11,327,

to a flat market open. with all pointers with talk tonight Well, the investment world is abuzz for Coles Myer as to who may eventually bid biggest takeover. in what would be Australia's Lateline Business understands may be involved. at least three private equity groups or Kohlberg Kravis Roberts, They include KKR,

the Brambles Cleanaway group. which recently bought bought anything in Australia, The Carlyle Group, which has never and CVC Asia Pacific, five years ago, which purchased Pacific Brands syndicate that bought Mayne Health. and more recently was part of the could be worth around $15 billion, A successful takeover private equity deal in Australia. almost 10 times the next biggest But questions are being asked about this potential deal. about just who knew more than 14% Coles Myer shares added today's revelation. in the days leading up to Since the announcement,

to close at $13.10. they've risen another 12% Neal Woolrich reports. for Coles Myer. It's been an eventful year the Myer department store chain. In March, the company sold Last month,

rebranding strategy, it announced a $900 million might be about to unfold. but even bigger changes it could be a takeover target. Today the group revealed Coles says it's: In a statement to the market any bona fide proposals Coles says it will consider with speculation and the markets have been rife that a bid might come from overseas. of course, is Wal-Mart, The first that pops into mind, the big US company.

in the UK. You could look at Tesco

More likely, in our view, the private equity players. is that it may be one of And Carl Daffy says in today's statement there's no clear sign that a firm bid will materialise. have even been held? Who's to say the discussions been approached at this stage, Technically speaking, they've only so it's still very early days. tomorrow morning Then again, we might wake up and find a bid on the table. does go ahead, But whether a takeover Coles investors are already winners. its share price climb by 12% today, A flurry of buying saw

to Coles' market value. adding $1.5 billion more than one interested buyer, And with rumours of drive its share price even higher. a bidding war could The news of a possible takeover a 7.5% lift in fourth-quarter sales. came on the same day Coles unveiled fairly impressive at 7.5%, The headline number looks that CPI is - has told us but the fact of the matter remains at those sorts of levels that those numbers need to be to maintain earnings per share. It's not clear how the strategy plans a possible takeover could affect three weeks ago John Fletcher announced in the retail market, and given the tough conditions want to spend up big right now. some are questioning why Coles would and liquor. Their core business is food It's a very staple market. obviously - Everybody has to eat every day - some of the fluctuations and it's not seeing in some other parts of retail. that you are seeing in this industry actually returns. So investing capital to Coles' new strategy direction Michael Peet says the key will be in the execution. It is a duopoly. It's a rational duopoly industry to invest in. and I think it's an attractive about a 10% premium to the market. So Coles is currently trading at is at a 30% premium. It's only that Woolworths

about a takeover bid for Coles Myer And that's why the speculation any time soon. doesn't look like dying down Neal Woolrich reporting. community is saying Well, to see what the investment of Coles Myer, about a possible sale with Tony Pearce, I spoke a short time ago from Legg Mason Asset Management.

Tony Pearce, thanks for talking to

bliz. So who's interested? Who's

the hot money on? The hot money is

anyone's guess at the moment. I'd

say probably private equity. There

has been talk of Wal-Mart, however

Wal-Mart's very close to Woolworths.

It would be surprising if it was

them. They would be probably

interested in the discount

operations, with K-mart and Target.

However I'd suggest on balance,

private equity is most likely.

And if it is private equity there's

been a lot of talk of KKR, Kohlberg

Kravis Roberts, do you think it's

them? Probably in a consortium, the

Carlisle Group has also been

mentioned? They are just about

mentioned in every takeover bid

private equity and quite probably mentioned in every takeover bid with

they are involved. We've heard

numbers of three to four in a

private equity syndicate. What sort

of dollars are we talking here?

Well the share price has been

$11.80 for a while before the Well the share price has been around

strategy review when it fell to $10. $11.80 for a while before the recent

$10.60. My thinking would be strategy review when it fell to

normally you see about a 20%

for a takeover bid. So if you were normally you see about a 20% premium

to work that on the $11.80 you

theoretically get up somewhere to work that on the $11.80 you would

to $15. But again, that's theory. theoretically get up somewhere close

It's anyone's guess what will

eventuate. What would it mean if

Coles Myer were bought by private

equity? I don't think they would

want major changes. We've

identified very good long-term

identified very good long-term value in Coles. We're very happy with

bid today because our portfolios in Coles. We're very happy with the

very overweight. But we saw that bid today because our portfolios are

value coming out over the next two

to three years and I'm tipping that

the private equity, or whoever it

is, has also been able to identify

those savings through the supply

chain, brand rationalisation. So

they would not want to upset the

boat, upset the customers. I would

have thought they'd let those cost

savings which are now well in train,

John Fletcher has done a great job.

To achieve those cost savings and

get a good return on investment.

Why in all the world of retailers

would they be interested in Coles

Myer? Is it a standout with one as

Myer? Is it a standout with one as a long way to go? I think it's one of

the last major, if not the last

major global retailer to start this

IT process to save costs in the

supply chain, as well as this brand

rationalisation which was announced

at the strategy review. So I think

they stand out as one that's got a

lot of costs to come out and that's

what we identified and no doubt

what we identified and no doubt they can see it. Obviously Wal-Mart

would also see that. So do you

would also see that. So do you think we'll hear tomorrow? Will we get

news of a bid if there is one,

tomorrow? I doubt it. I'd suggest

there's a lot of discussions. The

company's announcement referred to

parties. I'm not sure whether that

means three or four in a private

equity consortium or whether

equity consortium or whether there's more than one serious party. We

don't know. So I'd suggest there's

a lot of water to go under the

bridge. We probably won't know

anything until early next week.

anything until early next week. But the company hasn't said anything

further other than a brief

announcement today. In the interim

shareholders are reaping the

benefits. Thank you very much for

talking to us. Thanks alley, pleasure. And in a footnote to Coles Myer, Harvey Norman has released a statement tonight saying it's not in discussions regarding a takeover. As we said the prospect of Coles being on the auction block sent its shares skyward today, helping the stockmarket overall add nearly 2%. ANZ Bank's Warren Hogan hasbeen following all the action.

Warren Hogan, thanks for talking to

us. A huge day in business and on

the markets? Yeah, very big day on

the equity market today. We had a

very strong lead from Wall Street

which set a positive tone A series

of positive results from the

companies such as Qantas and

multiplex and I suppose the big

announcement of the day was from

Coles Myer which said that they've

fielded aye takeover offer from

unnamed sources which, of course,

given the lack of information there

really got the market going, Coles

ending up to a new record high and

the overall market up 1.9% on the

day. All of that also part of I

guess a global feel-good factor?

Yeah, very much so. Better than

expected inflation numbers out of

the United States this week has

the United States this week has seen equity markets around the world

rally and rally quite strongly.

Australia underperformed yesterday

but today more than caught up with

the 1.9% gain on the back of global

markets being up is% overnight.

Tomorrow, the big news and all the

focus I guess will be on the

focus I guess will be on the Reserve Bank governor's appearance? Yeah,

governor MacFarlane makes his last

appearance in front of the

politicians tomorrow. All the talk

is obviously about interest rate

rises. I think the market could be

surprised if he suggests that

they're comfortable with the

inflation outlook. There are risks

but if they're comfortable they're

not going to have to raise rates a

lot that could be another positive

for the market. Talking rates, what

about the dollar, it's testing new

levels? The Australian dollar is at

76, 75 that's about as far as it's

been able to go in the last month.

It's knocking on the door of a new

high. The positive news on the

equity markets is good news on

global commodity markets could see

global commodity markets could see a new high for the Aussie up to 77.5,

78 over the next few months. Warren

Hogan, thank you very much for your time. Well, it's where all the trade is done and now it's reaping the returns. The Australian Stock Exchange has reported another strong boost in full-year earnings. Its merger with the Sydney Futures Exchange appears to be well timed, with the increased volatility of recent months forecast to send profits even higher. Richard Lindell reports. While volatility is making life harder for investors, the newly merged Stock Exchange is well placed to profit in uncertain times. The more news there is, the more activity there is, the more volatility there is, we're likely to be a net beneficiary of that. A combined futures and equities exchange provides the ASX - a hedge during the peaks and troughs. With SFE there, it is a more defensive earnings stream. Also with regards to ASX and its change in its pricing model to a value-based system. Ironically that does actually lessen the cyclicality in their earnings from equity, in that there's a lesser influence from retail shareholders. But last financial year when small investors were flooding the market, the ASX delivered a record full-year profit of $137 million on revenue of $306 million. The Sydney Futures Exchange posted half-year earnings of $41 million and declared a dividend of just under 33 cents. The merged company is forecasting $14-$18 million a year

in cost savings, but analysts expect more. Judging by prior transactions cross-border it would seem to be a low number. We expect that there will be in the order of $25 million in synergies achieved. The ASX made a $10 million pre-tax profit, selling off its joint venture share registry with Perpetual, a company which has also delivered strong earnings growth over the past year. The financial services group posted a 14% increase in full-year profit to $135 million. A mark of its confidence in the economy, Perpetual lifted its total dividend by 25%. What we're seeing is quite a lot of volatility in the market, but really I'm not concerned about the settings from a macro perspective.

And with super adding a guaranteed 9% a year to the market, the Stock Exchange and Perpetual are well positioned for growth, even in more uncertain times. Richard Lindell reporting. One company not celebrating a profit jump today - though it wasn't as bad as it could have been - was Qantas. The airline announced a 30% drop in earnings, hit again by high oil prices. Qantas management is planning to stem the "slide" by cutting more jobs, raising fares and using the low-cost carrier, Jetstar, on international flights. The full-year result came in at $480 million. Finance correspondent Phillip Lasker. After five years in the chair, it's not getting any easier for Geoff Dixon. A slump in profits accompanied by yet another rise in the fuel levy for international travellers. I don't believe it will be significant but certainly the way things are now we believe, compared to the pressures we're under, it does require adjustments in various parts of the business. Those pressures include a fuel bill that was up 45% last financial year

and is predicted to rise close to $4 billion this year. Oil was the major negative in a profit of nearly $480 million, down 30%. Passenger numbers across the business were up, but Qantas's international business has lost market share.

The low-cost Jetstar is the star performer, grabbing about 13% of the travel market. We're going to concentrate Qantas more on the premium end of the market and Jetstar International we'll grow -

and I think we used the word in the press release 'aggressively'. Qantas is also expanding into the high-margin freight business, but the future is fraught with danger.

60% of Qantas's costs comprise labour and fuel.

So actually looking at what's happening to fuel costs is quite critical for Qantas. They announced today that they're going to use the best industrial instruments that they can. Their ability to contain labour will also be important moving into the future. Hence, the plans for more job cuts and $750 million in cost cuts. Phil Lasker reporting. I spoke to Qantas boss Geoff Dixon earlier.

Geoff Dixon thank you very much for

talking to Lateline Business.

talking to Lateline Business. Tough times and really, not that much

light at the end of the tunnel?

No, that's true, but it's an

No, that's true, but it's an airline and we expect that. Although I

wouldn't say there's no light at

wouldn't say there's no light at the end of the tunnel. I do think that

some day we won't be in quite this

security environment. Oil will

either settle down and go down a

little bit or we will have to have

made the business competitive at

made the business competitive at the current price. So, maybe there are

better times ahead. You flagged an

increase in the fuel levy, but only

for international passengers, by

for international passengers, by how much? Look, I'm not sure. When I

say I'm not sure, we're doing it on

a route by route basis. It is

a route by route basis. It is still being refind right at this moment.

We'll let people know some time

tomorrow. But certainly we're

tomorrow. But certainly we're going to try to adjust it more to the

stage length of the particular

flight. It's not necessarily -

It won't be a flat increase?

It won't be and on a longer flight

from, say, here to London you'd

obviously pay more than from here

obviously pay more than from here to Singapore. What would be the

Singapore. What would be the biggest increase $15, $20 from here to

London? It might be more because it

was charged on a different basis

before. I'd prefer to wait until

before. I'd prefer to wait until we find and it get it out some time

tomorrow. If we can look at the

restructuring program, you've said

there's a need for even more

fundamental restructuring. Are you

talking there about areas you've

talking there about areas you've not yet flagged? Oh yes we are. We

obviously have to keep looking at

new areas all the time but most of

this will be going back and looking

for the efficiencies upon the

efficiencies we've already got. It

obviously involves moving, flying

obviously involves moving, flying to lower cost operations such as

JetStar, all that's part of it. It

does involve further investment as

well in IT so we can get

efficiencies that way. It is

efficiencies that way. It is across the board. To that end, increasing

efficiencies, how much routes

currently operated by Qantas will

currently operated by Qantas will be picked up by JetStar International?

We can't say that, but what we will

be saying, we're putting a very

be saying, we're putting a very very close look over the viability of

routes that are flown by Qantas now

and routes that are not flown by

anybody, but Australia has the

rights. If it's best for it to be

flown by JetStar it will be flown

flown by JetStar it will be flown by JetStar. If we believe Qantas is

better suited for and it we believe

that Qantas can continue to get its

cost down, it will be flown by

Qantas. But what I do see is the

international operations, unless we

can improve the overall efficiency

of Qantas per se, that will be a

much more aggressively positioned

towards a two-brand strategy, with

JetStar playing a larger role and

perhaps Qantas playing a smaller

role. I prefer not to do that, and

I would prefer to be able to say

Qantas is just supreme and also

we've got a position for JetStar.

Is there any division inside the

Qantas group at the moment that you

think you could do without? Yes,

think you could do without? Yes, but I'm not going to name it on

I'm not going to name it on national television. There's one division?

I'm not going to name anything on

national television. We've only

national television. We've only got a certain amount of capital and we

keep saying, and we've emphasised

that today, that capital will be

allocated where it can best get the

return. If we can turn to freight

and you've already announced that

you're expanding in that area, you

say the aim in freight is to

consolidate and separate. Down the

track would you float that business

off? Oh yes, yeah, but I think we

also said today that separation of

any parts of our business if we

any parts of our business if we felt it was better for the ongoing

viability and success of the group,

we'd do that. But if you had to

we'd do that. But if you had to have a list of things to potentially

a list of things to potentially hive off, would freight be top of that

list? Freight would be, but then

there are some others there and you

mentioned JetStar. We've always

mentioned JetStar. We've always had a mantra in Qantas and it's

something we've announced to the

markets many times that the success

of JetStar and within the Qantas

group was because we watch very

carefully its competitive nature

against Qantas and so if you

against Qantas and so if you floated off that would probably not be

off that would probably not be quite the same. But there may be changed

circumstances and may be reasons

you'd do that. If you did float

something like freight I'd assume

you'd keep control? Oh yes. Geoff

Dixon many thanks for joining us. Thank you very much. And more news in the freight industry

with confirmation that Linfox has bought rival transport company FCL for an undisclosed sum.

The Fox family confirming the deal was finalised in the early hours of this morning. To other profit news today - and beleagured construction giant Multiplex has reported a $216 million result for the year,

despite suffering heavy losses from the redevelopment of London's Wembley Stadium. However market analysts are cautious about the result, saying new accounting measures may have helped the bottom line. Dianne Bain reports. Today Multiplex CEO Andrew Roberts was smiling for the cameras, but over the last 12 months he hasn't had much to laugh about. The redevelopment of Wembley Stadium has cost the company more than $255 million and Multiplex says it will try to recoup those losses in court. It's not a position we like to find ourselves in but where we must then we will pursue them and pursue them with vigour. Wembley won't be completed until June next year and Multiplex says it's bowing out of stadium construction for good. It's already pulled out of the running for a new sports arena in Perth. Did Wembley weigh into our thinking?

Yes, of course, undoubtedly. It's made us reluctant to want to continue to get involved in something like that. The baggage that comes with the Wembley Stadium project just will hang around for a while and the quicker they can get people to forget about that the better. The company has also revealed some of its multibillion-dollar construction projects may be delayed by more than 12 months. Market analysts are still digesting the results. Some believe they aren't as good as initially thought. When you actually drill down into the result, you see that the $216.8 million is not as great as it seems. It's basically been propped up by the revaluation of its assets and the fact that they've sold off some of their assets as well. The company's share price slid after its profit results were announced, but recovered to close marginally higher at $3.55. James Hardie's first-quarter earnings have taken a big hit, thanks to a currency-related charge

on its billion-dollar provision for compensation for asbestos victims. Operating profit was still up 12%, after the company expanded its market share in the US, where it makes most of its money. James Hardie is shifting towards higher-margin fibre cement as the housing boom in the US comes off the boil.

In a move that comes as no surprise, Tabcorp Holdings has withdrawn its takeover bid for Queensland-based UNiTAB. The announcement comes just 24 hours after

the Australian Competition and Consumer Commission told Tabcorp it would not approve the two companies joining forces. Rival gaming company Tattersall's now looks set to succeed with its $1.8 billion bid for UNiTAB, a bid the UNiTAB board has already accepted. Sparks flew today in the heavy industrial sector with BlueScope Steel buying a strategic 19.9% stake in rival Smorgon Steel. Its aim is simple - to block the planned merger between Smorgon and OneSteel, the country's top steelmaker. The raid came just days after the ACCC raised doubts about OneSteel's $1.5 billion offer. Well, to London now, where the FT100 has begun the day in subdued fashion. Before coming on air I spoke to Robert Orr, market reporter for the 'Financial Times'. Robert Orr, thanks for talking to us, how's trade in Europe this morning? Well, the markets are quite flat today. It is August, there's a lot of traders on holiday. I think the only real move is in the mining sector. We're seeing metal prices very strong. We're seeing nickel at an all-time high, and that's pushing up some of the mining companies which has a lot of miners in it, and that means that the FTSE 100 is higher today,

are pretty flat. but the other UK markets You've also had UK retail sales, this morning. and Eurozone inflation figures weaker than expected? I gather both have come in We had the UK retail sales. That's right. in July. They were less than expected There's a lot of reasons for that. One is the hot weather.

to go to the shops People are less likely and also the World Cup effect,

like flat screen TVs which is that the sales of things had a big boost in June when the World Cup ended. and that tailed off in July and Eurozone figures. And you correctly mentioned They came in less than expected. moment in Europe and in the US. Inflation is the big worry at the is less than expected, So the hope is that if inflation then that means that interest rates won't have to rise as much as some people fear. Do we think trade in New York when it opens, flat? Quick question on KKR. You would have heard the big story here - our retailer, Coles Myer. potential takeover for is mooted to be involved, KKR, the private equity group, what do you know about them? Well, if that's right, best-known in fact, KKR is one of the private equity company in the world. probably the best-known They're very very acquisitive. private equity buyout They recently made the biggest ever of US$33 billion, no surprise and it would certainly be if they were looking at Coles Myer. the likes of Tesco here in the UK. There's also other companies names Tesco out. You certainly couldn't rule and they're not commenting, We had some calls into Tesco today but we certainly couldn't rule Tesco out and Wal-Mart as well. Quite a few players, thank you for talking to us. Thanks. To the day's top mover - no, not Coles Myer, though it came close - but Kingsgate Consolidated. It owns Thailand's only gold mine and rose 17%

after announcing they've got more metal there than they thought. Australian Pipeline Trust rose by the same amount after energy retailer Alinta bought 4% of its stock from Coles - and Harvey Norman took a cue it was up 6%. Not many losers today, the falls were slight. and where there were, topped the field, Thereuputics firm Novogen shedding almost 4%. a new chief executive, AXA Asia Pacific has doesn't seem impressed. but so far the market Sydney Roads is 1% lower its profit-related falls - and Telecom New Zealand extended it's now at a 13-year low. a short-lived rally The Australian dollar trimmed yielding New Zealand dollar as selling pressure and the higher offset the impact of last night's tame American inflation figures. At the end of the day, it fell against all the major currencies. Gold moved up on a weaker American dollar.

A short time ago it traded at US$630 an ounce.

Oil prices fell for the fourth day running. They are now at their lowest in eight weeks. Tomorrow's diary now - with the unfolding Coles Myer story the focus of the market,

just a few results. Full-year numbers from the gaming group UNiTAB

and Thakral Holdings. As we said earlier, Ian Macfarlane the outgoing Reserve Bank Governor Representatives Economics Committee appears before the House of in Sydney, rates pain will be on the agenda. where the hot topic of interest and Wesfarmers CEO Richard Goyder And ACTU President Sharan Burrow are keynote speakers on labour productivity. at a Sydney conference Before we go, have handled the Coles story. a quick look at how the papers of Coles Myer CEO John Fletcher The 'Australian' carries a picture

And Bryan Frith comments, looking pensive.

"Where's there's smoke, Woolies could be next." On its front page, the 'Australian Financial Review' goes hard on the line that overseas private equity giants are plotting Australia's biggest corporate deal and the 'Age' says bluntly, "The raiders are at the gate." And that's all for tonight. I'll be back on Monday with all the day's business news and issues. But join Maxine McKew tomorrow night for a full business wrap on Lateline. any part of tonight's program, If you want to review you can visit our website at: the entire program online, ..where you can now watch or download it as a vodcast. We'd also love to get your feedback.

Our email address is: I'm Ali Moore. Goodnight.

International Pty Ltd Captioning and Subtitling Closed Captions produced by

This program is not subtitled

THEME MUSIC Good evening, and welcome to Set. A series dedicated to presenting

experimental music acts. Australia's premier for you on tonight's show, We've got some great performers with the percussion Robbie Avenaim, vibraphonist Dale Gorfinkel and the sound artist, Lucas Abela. Robbie Avenaim has explored many genres of music, from free punk to traditional Hasidic. Since 1989, he's been working in Australia's experimental music scene in a range of ensembles, including the notorious noise/rock trio, Phlegm.

Robbie is also a co-founder of the experimental music festival, "What is Music". His first work tonight is for modified drum kit and electronics. RISING FEEDBACK WHINE DRUMS PATTER BRIEFLY STACCATO TAPS MUTED CHIMES MORSE CODE BEEPS

FEEDBACK WHINE FADES BACK IN SOFT CHIMES STACCATO TAPS

SNARE DRUM PATTERS HIGH PITCHED ELECTRONIC TONE BY MORSE CODE BEEPS TONES MULTIPLY AND ARE JOINED HIGH HAT PATTERS PATTERING SOUNDS REPEAT FEEDBACK AND CHIMES CONTINUE TAPS FADE OUT SNAP! AND RISING FEEDBACK SQUEAL STACCATO TAPS

CYMBAL CLANKS FEEDBACK WHINES

OBJECTS CLATTER

MUTED CYMBAL SWISHES RINGING BUZZ FEEDBACK WHINE AND MORSE CODE BEEPS INTERMITTENT PATTERING CONTINUES

CELLOPHANE SCRAPES PATTERING CEASES

CELLOPHANE RUSTLES XYLOPHONE PATTERS METALLIC TAPS CRUNCH! SILENCE For our second piece tonight, Robbie is joined by Dale Gorfinkel. Dale has developed quite a unique approach to playing the vibraphone.

He uses its internal motor, which usually controls the tone of the instrument, that he places between the bars. as a way of agitating objects to create long tones. He also employs bowing techniques on the vibraphone, Robbie will be joining Dale of preparations and objects. and using his own variety STACCATO WOODEN TAPS HEAVY METAL CLANKS IRREGULARLY

REGULAR TAPS FAST-PACED HIGHER TONED AND SPEED TAPS GRADUALLY INCREASE IN VOLUME