HSF's merger dilemma

BHP cleared, ASIC raid, GYG drives thru expansion

November 15, 2024

G’day.

Welcome to Point Blank. The weekend’s almost here—here are your Friday essential insights to set you up for a sunny weekend!

Today’s brief: Who thinks a global merger with a US firm (that no one has really heard of) would be easy? Definitely not the HSF partners, who’ve raised concerns the merger will mean teams lose out on top work from bigger rivals. Not all is lost, though. HSF partners are welcome to grab a Cali burrito from GYG’s expanded drive-thrus or use their newfound profits to invest in ASX300 using Betashares’ new zero-commission ETF service.

Enjoy the Friday coffee ☕️ 

 💼 Practice Points

  • Despite 99% of employers having a formal policy on work-related sexual harassment and discrimination, a surprising 28% aren't tracking how widespread the issue actually is. Under the Dec 2022 reforms, employers now have a "positive duty" to actively prevent workplace sexual harassment and discrimination—not just react when things go wrong. This new legal obligation means employers and PCBUs must take proactive, meaningful steps to stamp out harassment before it even starts. Time to put the policies into practice.

  • The price of breaching competition laws just got a whole lot bigger. The Federal Government just cranked up penalties under the CCA: for companies, it’s now the greater of $50m, three times the benefit gained, or 30% of turnover during the breach. Individuals? Brace for up to $2.5m.

  • ASIC isn’t letting anyone off the hook for missing their paperwork. Optix Australasia Pty Ltd, a small proprietary company controlled by a South African-listed company, just shelled out $187k to ASIC for not lodging its FY23 financial reports.

🏘️ Word on the Street 

  • Now that the dust has settled on HSF's merger, reactions are a bit… mixed. While the deal is being hailed as the "missing piece" for HSF's global strategy—particularly in cracking the US market—the benefits for Australia aren’t as clear cut. Some partners are wary about losing referral business from big US firms like Kirkland & Ellis, thanks to potential conflicts of interest. The merger is set for a February vote, so watch this space.

  • Allens has named Chelsey Drake as its new chair, starting 1 January 2025, taking over from Fiona Crosbie. Drake has a corporate law background, having served on the Takeovers Panel since 2016.

  • Chris Evans has been appointed as the inaugural Australian Anti-Slavery Commissioner. But there’s no time to pop the champagne. The newly minted commissioner has 41,000 cases to tackle and only $8m to work with.

📢 Talking Points

  • Uber and Melbourne Airport are in hot water after a blind passenger and his guide dog were reportedly denied rides. The pair face discriminatory conduct claims for breaches of the Equal Opportunity Act.

  • A Brazilian court has cleared BHP and its JV partner Samarco Mineracao SA of criminal responsibility over the Samarco dam collapse that killed 19 people and caused widespread environmental damage.

  • As part of the social media ban, Minister Michelle Rowland has introduced a new "digital duty of care", which will make tech companies responsible for keeping Aussies safe online. Breach it, and they’ll face hefty penalties. Facebook could face legal action for letting something like the Christchurch shooting livestream slip, and X could be sued for not preventing harmful content, like the violent footage of the Wakeley stabbing.

  • Trump’s cabinet picks continue to create a ripple of uncertainty, with Robert F Kennedy Jr the latest for a top spot. The vaccine sceptic and pharmaceutical industry critic is to run the US health agency no less.

🏦 The Treasury

  • ASX is set to edge higher today. The jobless rate held steady at 4.1% in October. Bitcoin sits neatly at $88k post-Trump’s win, but Australia’s backing for the digital asset looks unlikely, with RBA’s governor Michele Bullock saying, “I don’t understand it”.

    ASX as at market close. Commodities and crypto in US dollars.

🤝 Deal Room

  • Wesfarmers and Seven Group Holdings are ditching big-ticket M&A moves to cut debt and add small bolt-on buys. Wesfarmers is focused on growing Kmart and Priceline while shelving mega-deals like Ramsay Health Care and steering clear of big ASX targets. Seven Group, rumoured to be eyeing BGC's building unit, is keeping a sharp eye on price and aiming to reduce debt ratios.

  • Spheria Asset Management, the third-largest shareholder in Pacific Smiles, has sold its 11.8% stake after Genesis Capital's latest takeover bid was shot down. As we covered in yesterday’s edition of Point Blank, Genesis upped its offer to $1.98 per share, but Pacific Smiles’ board wasn’t convinced. Are Pacific Smiles' repeated rejections starting to wear thin with shareholders?

  • Atturra seeks a $76.5m placement, including the $6m share purchase plan, to power up the IT group for an M&A bid with three potential targets in sight.

  • Pub landlord HPI is eyeing up to six new assets worth around $75m, and may even team up with “top-tier” operators to co-invest in hotels. This growth play comes as HPI fends off a takeover bid from property heavyweights Charter Hall and Hostplus.

🏗 Sector Specific

Diggers

  • Resolute Mining halts trading as the company fends off Mali’s $160m demand to pay ‘tax dispute’, which led to the CEO and 2 execs detained.

  • It’s been a rough ride for Paladin Energy. The CEO chalks up the company’s volatile share price to a cocktail of national security concerns over its $1.5bn purchase of Fission Uranium and some production hiccups at the Langer Heinrich mine in Namibia. The outcome? A hefty $800m market cap nosedive after the company trimmed its uranium production target from 4-4.5 million pounds to 3-3.6 million.

  • Perth’s buzzing with talk of an ASIC raid on Wildcat Resources, the lithium up-and-comer. Word is, ASIC has already executed warrants at Wildcat’s properties, seizing laptops, phones, and documents. The big question: What’s this all about? No official word yet, but we’re watching closely.

  • The plot thickens – AFR reports that MinRes paid $45m in May for a 49% stake in an industrial property that favoured Chris Ellison, his wife, chairman Peter Wade and a former director/ex-Goldman banker Kelvin Flynn. The transaction was only briefly mentioned in the annual report. MinRes also revealed that companies linked to the daughter of embattled MD Chris Ellison were asked to repay the $158k they received in ‘rent relief’.

Fin

  • Betashares is shaking things up by letting clients trade Aussie equities with zero fees. You can now invest in its ASX300 ETF via its platform without any fee – an Aussie first. The ETF specialist is also looking to rapidly expand into other services such as super.

  • Bell Financial is making moves with a $51 million bid to take over the popular low-cost platform Selfwealth. The trading platform offers a $9.95 flat fee for trades of $5k or below, while Bell Financial takes $15 off the top for 10 trades of up to $10k a pop. Still, CommSec remains the top contender despite heftier fees. The bid sits at 22¢ per share – an 83% premium to SelfWealth’s market cap a day before the bid. A revised offer is likely afoot with Selfwealth currently trading at 25¢ a share.

Tech

  • CBA CEO Matt Comyn is pushing for a "tech tax" on Apple, arguing they profit from payment systems without contributing to the infrastructure. While Apple takes a cut of card transactions, it’s not paying its fair share in taxes or costs. Maybe it’s time for them to chip in?

Retail & Real Estate

  • Guzman y Gomez is all about drive-throughs now. The Mexican fast-food chain is ramping up expansion, with 85% of sites being examined for drive-through potential.

  • Say goodbye to those sweet WFH long weekends! Coles is cracking the whip on 5,000 office workers, now mandating at least 3 days in the office each week. And to prevent extended weekend, one of those days has to be a Monday or Friday.

  • Amazon’s latest move—shop, stream, and snack. The retail giant is diving into food delivery, teaming up with DoorDash to offer Prime members free delivery on eligible orders for the next 24 months.