M2 dash for cash. The dissident shareholders in iiNet and hedge funds and other urgers have finally got a contested bid for the company, but what good will that do? Very little, except to enrich the hedge funds and advisers to M2 Group and iiNet.

M2 Group’s scrip and cash bid for iiNet valued the target at more than $1.5 billion, against the $1.4 billion cash offer put forward in March by TPG. M2’s offer values each iiNet share at approximately $11.37, comprising 0.803 M2 shares for each iiNet share (or $9.25, based on April 24 closing prices, $0.75 cash in the form of a special dividend, and $1.37 for the value of estimated synergies  — AKA hot air). The latter was the most amazing part of the M2 offer yesterday — claiming an unverifiable figure for so-called “synergies” is edgy, to say the least. Synergies are in the eyes of the bidder, not the receiving shareholders.

Fairfax Media reported this morning that the iiNet board had already rejected a deal with M2 because of fears about M2’s debt and the view that its shares were overvalued. M2 borrowed heavily to buy a Kiwi company called CallPlus for $257 million earlier this month. This means that if TPG lifts its cash offer (which is what hedge funds want) then M2 will have to scrabble around to raise the cash to match it. TPG also owns 6.25% of iiNet, which means if it doesn’t pitch a new bid, it will still get a stake of around 5% in the merged company and could launch a bid when the impact of an 80% jump in the number of M2 shares on the market pushes the price down. —Glenn Dyer

Running for the Hills Now this is a trend I’d like to see followed across corporate Australia. Adelaide tech/industrial group Hills Industries yesterday issued a surprise earnings downgrade that sent the shares down 16% at one stage.

But the real surprise was this part of the announcement by the CEO Ted Pretty (the former senior Telstra executive): a 20% cut in fees paid to non-executive directors from May 1, and a commitment to continue cutting costs elsewhere in the business. Looking at the 2014 annual report, fees paid to directors (including superannuation) range from $200,458 to the chair Jennifer Hill-Ling down to a low of $110,252 paid to newish director Peter Stancliffe. Another director, Phil Bullock, joined the board late in 2013-14 and was only paid $2381, but his total fee will be higher this year as he attends more board meetings — but not as high as it  looked a few weeks ago.

Of course, cuts like this are symbolic, but its better than doing nothing and taking more, as so many companies do when they get into trouble. Will Pretty be paid less than the $1.381 million the annual report says he received in 2013-14? Now that would be democratic. — Glenn Dyer

China means green business. As Environment Minister Greg Hunt continues to dance his victory jig over Direct Action, China’s central bank very quietly published a report midway through last week detailing a bill over the next five years for the country to meet its pollution reduction targets.

According to reports on Chinese media website, the cost is $US320 billion ($407 billion) a year for the next five years. Call me old fashioned, but that also sounds like a very convenient way of slipping a substantial stimulus package through the cracks and into the wider economy. The report was an examination of “green” financing needs in China.

According to the media reports, China’s central budget only covers 15% of the annual figure. So, the report calls for carbon trading (Oh, no, says Hunt), loans, bonds and special funds for green projects (echoes of our green financing and perhaps an opportunity to sell China some ideas and assistance, and make money? No?). No mention of Direct Action though — except that it sounds very much like a Maoist slogan. The report was done by a man called Ma Jun, a former Deutsche Bank economist and now chief research economist for the People’s Bank of China, so he’s not an airy fairy greenie. In fact, he wrote in the report: “It is crucial that the financial system play the role of channelling and incentivising private capital into the green sectors.” One example: China plans to combine seven city-based carbon trading pilots into a national scheme next year. A national trading system? Don’t tell Hunt, Tony Abbott or Joe Hockey. They don’t believe in market  mechanisms or solutions. — Glenn Dyer

Paving wave for rise. Recently-listed online surfwear group Surfstitch managed two things in a statement to the ASX yesterday. First, it revealed a juicy 37% upgrade in earnings, and second, it also explained last week’s unexplained 10% rise in the share price from $1.50 to $1.65.

Earnings rose 37% to an estimated $7 million, in comparison to the forecast of $5.1 million when the company listed last November. Nice and tidy that announcement yesterday — explaining why the shares rose sharply last week without an explanation (must have slipped the corporate mind, being an ASX newbie), and telling investors of the better-than-expected trading results. (These flowed from the $45 million takeover and rationalisation of a rival online action sports wear retailer in Europe just before the ASX listing.)

But the market wasn’t listening yesterday — the shares were up a cent, back to the record $1.65 level. — Glenn Dyer

Peter Fray

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