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May 5, 2008

Briefly Business: Octaviar, Allco, Microsoft vs Yahoo

Octaviar boss jumps from role ... Allco struggles to find Mobius buyer ... BG wants free gas ... After deal dies, Yahoo weighs its next move.

Octaviar boss jumps from role. After several months struggling to keep the company, once known as MFS afloat, 32-year old CEO Craig White has “resigned” as boss of the suspended funds manager. The company noted that “the board unanimously agreed that the appointment of Chris Scott and Chris Chapman as executive directors was the most appropriate way forward. It will ensure that the company remains entirely focussed on the best interests of creditors, shareholders and all other stakeholders.” The move isn’t a complete shock. First, it was somewhat surprising that White remained CEO given that he was deputy CEO during a time where the company managed to destroy almost one billion of shareholder wealth. Moreover, with the recent resignation of former MFS directors, Geoff Williams and Michael Hiscock, interests associated with Scott now control the Octaviar board. It was, however, most interesting to note Octaviar’s choice of words, with the company stating that Chris Scott would represent the interests of creditors and then shareholders. Australian case law provides that a company only owes a duty to its creditors when it is insolvent (or where there is a “real risk of insolvency”) – otherwise, a company’s primary duty is owed to shareholders. Was it an unfortunate choice of words by Octaviar, or are they all but conceding that the company is insolvent? — Adam Schwab

Allco struggles to find Mobius buyer. While former executive chairman David Coe relaxes in his $30 million harbour-front mansion, things don’t look quite as pretty in the Allco boardroom, with the company expected to shortly announce a $1.5 billion loss. Meanwhile, Allco is desperately trying to reduce its exposure to failed lender, Mobius. While the Rubicon fiasco represents Allco’s most morally indefensible transaction, the purchase of the balance of the Mobius mortgage business in 2006 remains the height of Allco’s stupidity. Mobius has a $1.2 billion loan book, of which, it is believed 22% of residential mortgage backed securities it has issued are in arrears. Mobius’ trouble began back in 2007 after it unwisely decided to purchase poorly performing loans from HLP Mortgage Co, which went into administration last February and Double Bay law firm R. L. Kremnizer. Back in October 2006, Allco paid $1.3 million to Wizard to increase its stake in Mobius to 80%, valuing the business at $3.25 million. With Mobius losing $31 million in the December 2007 half, one suspects Wizard’s Mark Bouris came out ahead in that deal. Today, the AFR reported that Allco is pushing ahead with its search to find a third party to manage Mobius while it tries to sell the business. Good luck. — Adam Schwab

Can the ASX query itself? After all, it is both stock trading platform and regulator, and of course, listed on itself. So the potential for conflicts of interest is big. But a $2.69 (7%) rise on Friday is more than enough reason for some to request a “please explain”. The shares closed at $37.82. This morning they added another 68 cents, or 1.8% in the first minutes of trading to around $38.50. But then the ASX claims to be able to play both judge and jury, so I suppose we can’t expect too much. It hit a low of around $34 on April 14, so the increase of around $3.78 on friday wasn’t spectacular, only around 11%. But seeing most of it happened on Friday, they should have been cause for a “speeding ticket”. Perhaps it was a belated reappraisal of the company’s performance in April when the market rose more than 4% and had its strongest period for around five months. But the ASX makes money no matter if the market is rising or falling: it just makes more money when it rises. Now what about the shorting, naked and covered, and the stock lending? … And another big mover in recent weeks has been insurer and funds manager, Tower Australia Ltd. Tower shares have risen strongly since a low of just under $2.20 also hit on April 14. They hit $2.74 on Friday and eased 2 cents this morning to $2.72. That’s a rise of 24%. Now why hasn’t that earned a “please explain” from the ASX. — Glenn Dyer

BG wants free gas. BG Group’s bid for Origin Energy is beginning to look like another example of Australian institutional investors selling resources assets too cheaply to foreign buyers.At $14.70 cash per share, the price is a 40 per cent premium to Origin’s last sale. However, Origin’s share price is now sitting around $14, instead of trading above the bid price as usual, because no hedge fund is prepared to bet on a higher price. The impression you get is that it’s all over bar the shouting and Origin’s shareholders are falling over themselves to sign the acceptance forms. Not so fast. Origin’s board should – and, I believe, will – reject BG’s first offer and the British firm will have to pay more for a board recommendation. — Alan Kohler, Business Spectator

After deal dies, Yahoo weighs its next move. How low will Yahoo’s stock go on Monday? And how long will it stay there? These questions are high in the minds of Yahoo shareholders, and probably its management, as the company considers its options after Microsoft’s decision to withdraw its offer to buy Yahoo for $33 a share, or approximately $47.5 billion … Yahoo defended its decision, saying it had always thought Microsoft’s offer undervalued the company. Officially, the company has shed little light on what it might do next. “We remain focused on maximizing shareholder value and pursuing strategic opportunities that position Yahoo for success and leadership in its markets,” Roy Bostock, Yahoo’s chairman, said in a statement issued late Saturday. But people close to the company suggested that Yahoo’s most likely lifeline could come from an unlikely source: Google. The two companies recently conducted a two-week test in which Google delivered ads on a small portion of Yahoo searches. The test, which both companies described as successful, was intended to show how much more Yahoo could earn by outsourcing some of its search ads to Google, whose technology and large base of advertisers allow it to extract more revenue on average for every search. Now Google and Yahoo will have to decide whether to move from test to broader partnership. — Miguel Helft, New York Times

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3 thoughts on “Briefly Business: Octaviar, Allco, Microsoft vs Yahoo

  1. tracey

    we have lost money with Octaviar. what do you do? who do you talk to. obviously our finance adviser cant help, he got us into this mess. as im in victoria, we have seen nor heard nothing in the media. we have only learnt of this mess from the letters they sent us, and it was only when i rang our fiance man did i fully understand the extent of it all. we were told our money was safe from this sort of drama. guess thats what happens when you trust in “trained” business men.

  2. db

    asx does not “supervise” itself. asic supervises asx. actually, if an odd price movement were detected, it would have picked up been by asx’s surveillance area. they would then send it to asic to do with as asic deemed necessary.

  3. The Kid From Bondi

    “While former executive chairman David Coe relaxes in his $30 million harbour-front mansion” the company is expected to shortly announce a $1.5 billion loss.

    I rest my case!

    PS And what is the status of the Coe super yacht currently under construction? Will he be low key and moor it in front of his little mate’s missus’ $30 mil joint? I am sure that Ruprecht won’t mind.