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Of Bulls & Bears

Friday 24th November 2000

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Sir Ronald holds key to Nufarm bid

Nufarm's bid this week for Australian rural services and retailing company IAMA has been many months in the making. The former New Zealand agrichemicals company bought its first stake in 1998 but never held more than about 7% of the company. This changed in April when Nufarm paid $A1.30 a share ($1.69) to raise its stake to 19.62%, a fraction under the 20% threshold that would trigger a full takeover bid. At that time, managing director Douglas Rathbone tried to dampen down any rumours by saying "Nufarm has no intention of increasing its stake to over 20% and today's acquisition should not be seen as a move toward full ownership of IAMA." This was not enough to fool Sir Ronald Brierley and friends at Guinness Peat Group. The corporate raider took a 5.13% stake on June 27 at around $A1 a share. No doubt it will be holding out for a substantial margin above that price and the current market price of around $1.40 as a reward for ensuring a smooth takeover.

Brandes makes rum investments

An announcement this week that giant Californian investment company Brandes Investment Partners had raised its stake in Telecom appears to be a vote of confidence in the beleaguered telco. The company filed a substantial securityholder notice on Wednesday showing it had raised its interest from 8.7% to 9.8%, a stake worth a tidy $679 million. Investors could be forgiven for thinking this is a major confirmation that Telecom's price has turned after months of decline but this is not necessarily the case. Brandes has been a regular buyer this year of Telecom at some generous prices. That first came to light when it bought 5.2% of Telecom on January 11 at about $8.50 a share. It raised its stake to 6.2% on March 16 at about $9.20 then to 8.7% on September 21 at about $6 a share. Its latest move to a 9.8% stake cost it about $5.70 a share. It appears Brandes is taking advantage of low prices to average down its very expensive entry prices rather than leading a long-awaited rush of foreign capital into Telecom.

Strathmore suffers share shakeout

Everyone knows e-commerce shares are out of favour right now but Strathmore is a virtual pariah. From its tech bubble high of 64c early this year, the company's shares have been free-falling to a yearly low of 16c this week. This is despite the announcement last month of an improved net profit of $2.7 million for the year to July 31 against $2 million last year. Investors don't appear to have heeded executive chairman Phil Norman's words at the time that "the result was particularly pleasing given the early stage in the development of Strathmore's investments." Perhaps a few more profitable IT venture capital deals will lift their spirits but investors seem to have got it into their heads that such activity is rather risky.

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