It may be something in the air, or the expectation of a lousy profit reporting season, but rumour has it that the whole of Australia is about to be sold.
Speculation can be damned good for a company's share price, particularly in these difficult times, and in the past week several well-known Australian companies have benefited, at least in the short term, from the vivid imagination of deal-hungry merchant bankers and impressionable fund managers and brokers. Witness the gains enjoyed by the likes of Southcorp, Howard Smith, Crane Group and Pasminco, to name a few.
Some of the talk may even be true. Certainly, Australians are an acquisitive lot. Deals involving Australian companies last year topped $A83 billion ($102.6 billion). That number is dwarfed by the US figure of $US3.4 trillion, but it was a record and the Australian market grew seven times faster than the US'.
There are several reasons for the activity. Industries still exist in Australia that can support some rationalisation without the intervention of the Australian Consumer and Competition Commission - witness the Colonial merger with Commonwealth Bank - but the driving force is coming from cross-border transactions, as European firms in particular take advantage of their strong currency and come in search of bargains and growth prospects.
This coming year could also be a record. Already, Cable & Wireless Optus, which is not benefiting from a speculative jump in its share price, is poised to be sold or split up by its parent in a deal that will value the company at anything from $A12 billion to $A17 billion. It might even go to Telecom New Zealand.
The Anglo-Dutch group Shell is still battling to impose its $A7 billion stock-for-asset swap on Woodside Petroleum, and Brambles and the UK's GKN are poised to announce a merger of their operations that could be valued north of $A5 billion.
Then there is BHP and Rio Tinto. The latter spent $A7 billion in the past 12 months snapping up assets such as North and Ashton Mining, and will likely spend much of 2001 spitting out the bits it doesn't like. Already, it has sold the Yackabindie nickel deposit and a Norwegian zinc mine. Its stakes in ERA and a few other assets are likely to follow.
BHP, which made a single purchase of QCT Resources and split off OneSteel, is expected to use some of its lazy financial muscle to pick up a few bargains.
When Alan Greenspan first hit the reverse throttle in interest rates early last month, there was still an air of invincibility about the US economy. That facade has disappeared with the second big cut within four weeks.
Yesterday , the Reserve Bank of Australia did the expected and followed with a 50 basis point cut of its own. But the bank and Treasurer Peter Costello insisted the rate cut was motivated by inflation control, not from a fear of a slowing economy.
They may be very wrong. Coles Myer announced yesterday morning that its sales growth has slumped markedly and it now expects a huge fall in profits this year. The next rate cut may not be as far away as some experts think.
* Giles Parkinson is editor of AFR.com.
<i>Sydney view:</i> Takeover fever - but don't rule out new interest drop
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