Jockeying for position on the ALH on its share register.

Australian Leisure and Hospitality continues to attract jockeying on its share register, just as it seems Bruandwo, the joint venture between Woolworths and Bruce Mathieson, seems to be on the verge of success.

The Bruandwo higher offer late last week of $3.15 a share (and shareholders can keep their dividend of 6.5c a share, generous, aren’t they) has got a recommendation of acceptance from the ALH board pending any more offers, such as a counter bid from private equity group, Newbridge.

So it comes as something of a surprise to find that Bruandwo’s financial adviser, UBS, has lifted its stake in ALH to just over 10%. UBS bought Bruandwo’s original stake back of around 16% in June and early July before the bid was revealed on July 2. But the substantial shareholding notice lodged on Tuesday shows that UBS had held 8 million shares bought on August 31, until September 30, last Thursday when it purchased 7.762 million shares at an average price of $3.225, and then followed up the next day, October 1 with a much bigger purchase of a total of 18.810 million shares worth more than $60.9 million. The average price was just over $3.23 per share.

So last week after Newbridge had emerged two days earlier on September 28 with a rival bid, Woolies and Mathieson adviser, UBS started buying ALH shares at above the affective Newbridge price of $3.15 on September 28. That continued into the next day after ALH directors had recommended the new Bruandwo offer made the night before.

On those two days UBS bought more than 26.5 million shares at a cost of more than $68 million. At prices above the $3.15 on offer from Bruandwo, even after the final dividend is taken into account (and if the shares qualify!) They had earlier paid $2.92 per share for the eight million bought on August 31, at a cost of $23.36 million.

In all UBS has spent more than $90 million, probably at a loss or break even depending on the brokerage and commission from the June raid.

There are of course the fees from Bruandwo to sweeten the pot. One of the sellers last week was German owned investment bank and funds manager, Deutsche which sold more than 8.8 million shares in Australian Leisure and Hospitality. Deutsche announced on Monday that its stake in ALH had fallen from 8.26% to 5.75%, or from 29.109 million shares to 20.262 million. That’s a difference of 8.847 million.

There was fairly active trading up till September 20 when activity stopped, only to see a multitude of separate sales on Friday. Clearly some of its clients wanted to cash out above the $3.10 price that the fund manager had been signalling was its exit price. So why didn’t all Deutsche’s clients sell? Are they waiting for another offer or to get the extra 5c on offer from Bruandwo? But Deutsche still holds enough shares to influence the success of the Woolworths-Bruce Mathieson bid, or a counter offer from Newbridge. As does UBS.

That shareholding needs an explanation to make sure if it is linked to the Woolies offer, then there should be a substantial shareholding notice from Bruandwo. Hedge funds associated with UBS have done this sort of trading before, most notably in MIM when Xstrata was bidding.

But you have to ask, why the concerted buying last Thursday and Friday, just when the takeover war for ALH got interesting with a counter bid from Newbridge and then a higher offer from the UBS client?

Are the hedge funds, if it is them, banking on another, much higher offer? Or are the people who bought the shares silly and not good with money? At UBS, somehow I doubt that!

At the moment the shares bought late last week are under water by around $2 million at the $3.15 offer from Bruandwo, while the profit on the eight million bought in late August is about $1.8 million at the offer price of $3.15 and around $2 million at the current price of $3.22.

A nice, neat, easy to understand explanation is in order from UBS, especially how ALH wasn’t such a good buy from August 31 to last Thursday and Friday especially when the price paid was much higher than for much of September.