The quite radical proposal to demerge AGL’s energy and infrastructure
businesses unveiled yesterday is a logical progression of the group’s
continuing search for an optimal structure, says Stephen Bartholomeusz in The Age.
It is a brave board and management that breaks up a $7 billion company
with a reasonable amount of logic to its portfolio of businesses to
create two businesses of half that size, particularly when the sector
is still consolidating. But the split has an underlying rationale at
both the financial and operational levels and the initial market
response — critical if the demerger is to create the value AGL is
pursuing — was largely positive.

A few fund managers and
analysts I spoke to yesterday mentioned that they thought the price
paid by AGL for Southern Hydro would be the high-water mark of
Australia’s infrastructure bubble (as with the Makybe Diva bubble,
which peaked yesterday), says Alan Kohler
in The Smage. The price of $1.4 billion is 17 times estimated 2007
profit before depreciation, interest and tax, which is a 6 per cent
cash flow yield on a fully debt-funded acquisition. So after funding
costs the investment will return zero, or a bit less, in two years. The
reasoning apparently lies in Southern Hydro’s value in the AGL
demerger. The general tone of the analyst reports on this deal
yesterday were that AGL paid way too much for Southern Hydro but that
it will all work out in the end because the demerger is such a terrific

The real battle for control of Coopers Brewery should get
under way soon with the posting of Lion Nathan’s bid documents,
followed by the defending board’s target’s statement, says Bryan Frith in The Australian.

The Fin Review
reports that the ACCC is to dramatically widen its use of criminal
prosecutions to force company executives to reveal private business
deals, in a move that gives it powerful new ways to crack down on
anti-competitive conduct.

And Dubai-based airline Emirates has
asked the Federal Government for the right to double flights in and out
of Australia from 42 to 84 as part of a plan to continue the airline’s
aggressive growth, reports The Age.

Wall Street, US stocks ended lower overnight after the Federal Reserve
raised short-term interest rates to 4% and signalled further hikes were
in the offing, in a market pressured from the outset by a disappointing
profit outlook from Dell. The Dow Jones closed down 33.3 points at
10,406 – MarketWatch has a full report here.