Offers for control of Stella may be revealed today

With MFS reportedly considering offers for a majority stake in its Stella Group tourism division a number of companies acquired by Stella over the last year or so are set to change hands.

ASX-listed MFS and stapled security MFS Living and Leisure, which is dual-listed on the Australian and New Zealand stock exchanges, were placed into trading halts as MFS announced “unsolicited proposals” for Stella as well as a change in CEO.

In an announcement to the ASX, MFS said, “MFS is considering unsolicited proposals received from a number of parties in relation to the purchase of a majority interest in Stella.”

MFS founder and chief executive Michael King resigned yesterday as the investment group suspended its shares from trading for the second time in less than a week, with Mr King’s resignation following an MFS statement yesterday morning that it was “considering” replacing him as chief executive, coming came after the company’s request on Friday for $550 million in equity as part of a restructuring deal.

That deal aimed to split its MFS financial services arm from its Stella tourism and accommodation letting group.

MFS called for the trading halt yesterday morning because it was considering proposals received from “a number of parties” on Sunday night to buy a “majority interest” in Stella.

MFS executives yesterday refused to comment further on the trading halt, but the group confirmed chairman Andrew Peacock – a former federal opposition leader – had cut short a US holiday and returned to Australia to help map out a recovery plan.

Mr King will be replaced by MFS deputy chief executive Craig White, with MFS shares losing more than $1.5 billion on Friday following the announcement of its restructuring deal and the proposed equity raising, with many investors concerned MFS was hiding debt.

Potential previous bidder for MFS’s financial services business, Gold Coast company City Pacific, yesterday walked away from a scrip offer it made for MFS Financial Services group last Monday, with under that proposed deal, City Pacific had valued MFS Financial Services at about $1.33 billion, with based on a trading price of 99c, but that business and MFS’s Stella arm combined has dropped to $480 million.

In a statement, City Pacific chief executive Phil Sullivan said the group had withdrawn that original proposal after weekend “discussions” with MFS had failed, but City Pacific was still interested in acquiring the MFS Financial Services Business.

Reuters says that MFS would not disclose who it was in discussions with but analysts suggested private equity group CVC – which negotiated to buy Stella last year – could be drawn back to the deal by MFS’s weak position.

MFS is expected to emerge from its trading halt with some details about a potential suitor for Stella, which includes the Harvey World Travel and Travelscene American Express businesses, management rights to holiday apartment rentals along Australia’s east coast, wholesalers and travel agencies in Britain.

“We expect there will be some sort of value placed on the Stella business,” Shaw Stockbroking’s Brent Mitchell said. “It could be CVC coming back, someone new or both.”

Stella rival Flight Centre yesterday moved to douse speculation that it was a likely suitor, adding, “To us they don’t look like terribly exciting assets, and we feel they certainly paid high prices for the assets we know about,” Flight Centre chief executive Graham Turner told The Australian yesterday.

Mr Turner said there was a possibility Flight Centre could buy some Stella assets if asking prices for those assets fell markedly, but said Flight Centre was “not interested at this stage”.

A spokesman for MFS said the company expected to make a further announcement regarding Stella by today when the trading halt is due to be lifted.

A Report by The Mole from Reuters