Holmes a Court’s Eurobond Issue Spurs Takeover Talk
A $764-million Eurobond issue by a company controlled by Robert Holmes a Court has raised speculation that the Australian investor may be raising money to finance further takeover activity.
Holmes a Court’s investments include U.S. oil giant Texaco Inc., in which he has accumulated a stake of more than 9.6% at prices totaling about $850 million.
Bell Resources, a unit of the Perth, Australia-based Bell Group Ltd., issued a package of convertible 10-year Eurobonds on Wednesday. The package included $575 million in U.S. currency bonds, Australian dollar bonds valued at about $108 million at current exchange rates and the equivalent of $82 million in bonds denominated in British pounds.
Each of the three currency offerings allows holders to convert their bonds into shares of Broken Hill Proprietary Co., Australia’s biggest public company, in which Bell Group holds a 28% stake.
The European edition of the Wall Street Journal reported that syndication specialists believed that the offering was one of the largest convertible Eurobond offerings ever. Convertible bonds, which can be turned into stock, have been one of the few bright spots in the otherwise lackluster Eurobond markets this year, the newspaper stated.
Bell Group officials said proceeds would be used to reduce debt at Bell Resources. But analysts suggested that Holmes a Court might use the big addition to his war chest to boost any of a half-dozen strategic equity stakes, ranging from Texaco to the British banks Standard Chartered or Morgan Grenfell Group.
Bell Group Silent
Holmes a Court has stated that his Texaco stake was only for investment purposes.
However, there has been persistent analyst speculation that Holmes a Court might seek control of Morgan Grenfell, the large merchant bank long rumored as a takeover target. Dewey Warren Holdings, a British insurer effectively controlled by Bell Group, purchased a 5.2% holding in Morgan Grenfell in July.
Martin Green, a banking analyst at the London brokerage Smith New Court, cited market rumors that last week Holmes a Court bought a 3% stake in Willis Faber, a British insurance brokerage group that holds a roughly 20% stake in Morgan Grenfell. In Britain, holdings of less than 5% do not have to be disclosed.
A Bell Group official would not comment on any recent investments or takeover plans.
Although complex, the Eurobond package seemed well-received by investors, the newspaper reported. Traders reported strong demand for the sterling and Australian dollar portions, which “were very fairly priced,” according to Alan Goodhill, head of convertible Eurobond trading for Morgan Stanley & Co. in London.
