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HONG KONG (Reuters) - Riding the commodity boom but struggling with costs, the mining services industry looks headed for a batch of takeovers.

While the sector is no stranger to acquisitions, slowing growth has buried stock prices of many firms this year, making the companies more affordable to prospective buyers.

One deal already underway is a A$436 million (212 million pound) hostile bid by Australian construction firm Macmahon Holdings Ltd (MAH.AX: Quote, Profile, Research) for mining and utilities contractor Ausdrill Ltd (ASL.AX: Quote, Profile, Research), as Macmahon seeks to bulk up as its key mining customers also merge.

Drilling supply company Imdex Ltd (IMD.AX: Quote, Profile, Research), earthmover Emeco Holdings (EHL.AX: Quote, Profile, Research), and engineering firm GRD Ltd (GRD.AX: Quote, Profile, Research) are among other companies cited as top takeover candidates in a research note by Austock analysts.

GRD’s shares had dropped nearly 60 percent in the last three months to Wednesday’s close and Imdex had shed nearly 30 percent, while Emeco had eked out a 3 percent gain.

Austock also sees smaller targets in mineral testing firm Ammtec Ltd (AEC.AX: Quote, Profile, Research) and construction company Brierty (BYL.AX: Quote, Profile, Research).

Consolidating the Australia-centred mining services group would give it enough scale to handle contracts from the new crop of recently merged mining giants.

Private equity firms have also taken notice of the industry, attracted by its steady cash flows, low valuations and indirect exposure to the commodity price boom.

“We continue to look for investments in areas linked to natural resources, such as mining services,” said Daniel Carroll, managing director in Hong Kong for U.S. buyout giant TPG Capital.

Carroll, speaking to delegates at Boao Forum’s International Capital Conference in London last month, mentioned steel and coal as areas he was interested in.

COMMODITY BOOM

Commodity prices from iron ore to copper to coal are soaring on demand from Asia’s booming economies. The Reuters/Jefferies CRB index .CRB, which tracks 19 commodity futures, is up 25 percent so far this year.

The demand has spurred greater need for the consulting, engineering, transport, drilling and logistics firms.

Consultant Metals Economics Group expects global nonferrous mining exploration spending to soar 25 percent this year to $13.1 billion. But the uptick in business has not always translated into a bump in stock price for the service companies.

“Not all of them have managed to make money in the mining boom thus far because they do have cost pressures - mainly manpower,” said Tim Goldsmith, global mining leader at PriceWaterhouseCoopers.

He said costs could be roughly split into three P’s: people, power and procurement. All three were being pushed up, with a shortage of skilled and unskilled labour, high diesel costs and historically long lead times on mining equipment orders.

Large haul trucks and their huge tyres, which used to arrive within 4 or 5 months, now take two years or more. Goldsmith said some companies were even taking the risk of ordering equipment before they had clinched the final agreement on a project.

One investment banker in the sector said these pressures would push companies towards acquiring rivals and suppliers.

“Scale gives you pricing power and equipment is in such short supply at the moment, if you know someone with a good order book, it makes sense,” he said.

Examples of big mining mergers include Xstrata buying Canadian nickel producer Falconbridge in 2006. Miner BHP Billiton is trying to buy rival Rio Tinto for $170 billion.

U.S.-based drilling services company Boart Longyear (BLY.AX: Quote, Profile, Research) was bought by private equity in a deal others would like to copy.

Boart’s management teamed up with Advent International and Bain Capital to take it private from mining giant Anglo American (AAL.L: Quote, Profile, Research) in July 2005. A consortium led by Macquarie Bank bought 50 percent in September 2006, valueing the firm at A$547 million.

When they listed the firm in April 2007, they raised A$2.35 billion, Sydney’s biggest flotation for a decade and a lucrative exit for private equity.

TAKEOVER CANDIDATES

In Austock’s analysis, key takeover factors were operations in niche markets, low valuations, profit disappointments for still attractive businesses, and synergies with a possible acquirer.

“Consolidation to date in mining services has been focused on unlisted companies,” says the Austock note, published earlier this month. “The market price pull back has made listed companies better value and we expect further consolidation.”

Among the companies that makes Austock’s “takeover assessment table” is Boart Longyear. From January to April its stock lost nearly half its value, before rallying to the low A$2 range in the last few months.

Austock highlights Imdex, a supplier to Boart which provides drilling fluids and down-hole instruments, as a takeover stock. Its shares have slumped from an all-time high of A$2.76 in December to A$1.6.

Also highlighted is Perth-based earthmoving company Emeco Holdings, a private equity-backed company whose shares are under pressure, and engineering firm GRD, which has plunged 76 percent since rejecting a takeover bid worth up to A$529 million from rival Transfield Services (TSE.AX: Quote, Profile, Research) last August.

LONDON (Reuters) - Vulture funds are circling housebuilders as their debt and equity prices plunge, debt traders said, hoping for rich pickings as a 10-year boom in the sector is ended by an economic slowdown.

The funds, which look for profit in distressed assets, have been attracted by prices as low as 20 pence in the pound for the debt of some of Britain’s well known housebuilders, one trader said.

Discounts offered at banks such as Lehman (LEH.N: Quote, Profile, Research), Deutsche Bank (DBKGn.DE: Quote, Profile, Research) or Merrill Lynch MER.L average about 50 percent, distressed traders said.

“In due course, I would expect the debt to trade down significantly,” said Peter Baldwin, a partner at law firm Jones Day, which specialises in debt restructurings.

Vulture funds buy cheap debt in the hope its value will increase in the short to medium term. Others look for companies in danger of breaching bank loan covenants that open up the opportunity to gain control through a debt-for-equity swap.

The vulture funds are currently focusing on leverage buy-outs — acquisitions that are largely financed by debt — as they are more vulnerable to the credit crunch.

Housebuilders Crest Nicholson and McCarthy & Stone are two examples where funds are offering to take the debt off the books from the original lenders, the trading sources said.

Crest Nicholson Plc became a private company last year, when it was acquired by Castle Bidco Ltd, a 50-50 joint venture between HBOS (HBOS.L: Quote, Profile, Research) and West Coast Capital.

McCarthy & Stone also became private in 2006, with HBOS being its principal shareholder.

HOT SECTOR

Billions of pounds have been raised over the past few months to invest in distressed assets, from hedge funds and private equity firms such as Oaktree and TPG.

These investors are keenly waiting for the holders of the loans to sell, but some banks look set to hold onto these assets as selling at a deeply discounted price would mean further write downs on top of hundreds of billions already made.

Barratt Developments (BDEV.L: Quote, Profile, Research) said on Thursday it had agreed a new 400 million pound loan with its lenders, which includes changes to its bank covenants to avoid a breach.

Other investors, such as Collateralised Loan Obligation CLO.L funds, may be forced to sell their loans as they are not allowed to invest in distressed companies, creating liquidity in the secondary markets.

“The markets are starting to move although we haven’t seen trades yet, but if there’s a move it means the trades are about to start,” a trader at a distressed debt trading desk said. “This has all started over the past week.”

British home prices fell 2 percent in June, the sharpest annual pace in at least two decades, according to data on Thursday from HBOS, the country’s biggest mortgage lender.

Housebuilders Barratt, Taylor Wimpey (TW.L: Quote, Profile, Research), Persimmon Plc (PSN.L: Quote, Profile, Research) and others have all seen their share prices collapse as house prices fall due to the economic slowdown.

Today Towergate has announced that Patrick Snowball is to relinquish his role as non-executive director on the Board of Towergate Partnership.

However, Snowball will retain his position as Towergate Financial Services’ chairman, in addition to his shareholding.

He first joined the firm in May of last year, and since that time he has focused on building Towergate Financial Services (TFS) and putting together a top class management team.

TFS is set to continue its search for a chief executive to work alongside Snowball.

Towergate’s executive chairman, Peter Cullum, has praised Snowball’s part in the establishment and development of TFS.

Google apparently decided to keep it clean, in more ways than one.

The company has made a minor change to its home page, adding a link to its copyright line that leads to its Privacy Center. Google’s decision, noted Thursday afternoon in a corporate blog and a public policy blog, was an attempt to quell a controversy over the posting of its privacy policy.

The attempt succeeded.

Marc Rotenberg, executive director of the Electronic Privacy Information Center, said Saturday that his group is “pleased” with the decision.

“This was not only required by California law (and Google is a California corporation) but is also the standard practice for commercial Web sites,” he said in an e-mail.

The Electronic Privacy Information Center had joined with the Privacy Rights Clearinghouse and the World Privacy Forum in leading the effort to press Google to make the change.

Pam Dixon, executive director of the World Privacy Forum, also welcomed Google’s decision.

“Although privacy policies are not a guarantee of perfect privacy practices, they are still an important tool for consumers,” she said Saturday in an e-mail. Dixon added that such links are “something consumers have come to expect, and rightly so given that it is a standard practice.”

The timing of Google’s announcement–the afternoon before a long holiday weekend–may have appeared suspicious to some. But Rotenberg noted that his group “helped draw attention to the 30-day time limit in the California law following notice. We literally counted to 30 after sending the letter. Day 31 arrived and Google posted the link.”

(Credit: Google)

Saul Hansell, a reporter with The New York Times, first brought the issue to light in May when he asked whether the company was violating California law by not posting a link to its privacy policy on its home page.

Privacy advocates soon got involved, sending Google a formal letter on June 3 (PDF). Google had maintained that it was doing nothing unlawful.

Being a holiday weekend, reaction to Google’s change has been a bit sparse. At least one member of the blogosphere asserts that the link doesn’t resolve the issue because it doesn’t link directly to the privacy policy. Another concludes that the whole controversy was silly to begin with.

Google competitors Microsoft, Yahoo, AOL, and Ask.com, by the way, all provide links to their privacy policies on their home pages.

A couple of side notes: Google Vice President Marissa Mayer noted in the corporate blog that Google founders Larry Page and Sergey Brin required the famously sparse home page to remain clean at 28 words, even with the change. Thus, the company removed the word “Google” from the copyright line and replaced it with “Privacy.” Also her blog’s title–”What comes next in this series? 13, 33, 53, 61, 37, 28…”–was remarkably obscure.

PartnerRe Ltd has announced a range of personnel changes in its global leadership positions.

Emmanuel Clarke is named as the new worldwide Specialty Lines chief, with the appointment taking effect from 1 September of this year.

Clarke replaces Kurt Angst, who is to retire at the end of 2008 after four decades in the industry.

He will be responsible for all the firm’s non-US specialty lines business and will report directly to chief executive officer of PartnerRe Global, Costas Miranthis.

Clarke joined the firm 11 years ago, and will bring 14 years of reinsurance industry experience to his new position.

He will work closely with Angst leading up to his formal assumption of his new role.

PartnerRe is also appointing a new global chief of Property and Casualty, Alain Flandrin.

Flandrin, who will also report to Miranthis, first joined the firm 6 years ago and will be succeeded in his present role as Property and Casualty chief for Benelux by Patrick Chevrel.

Elsewhere in the firm, Scott Altstadt will retain his post as chief pricing actuary and also take up the newly created position as deputy head of global Property and Casualty.

Francis Blumberg becomes head of Property and Casualty for Canada.

Ask.com, the fourth-ranked search engine, has completed its acquisition of Lexico Publishing Group, which owns Dictionary.com, Thesaurus.com, and Reference.com.

Ask.com, a wholly owned subsidiary of InterActiveCorp, had announced the all-cash deal in mid-May. Financial terms of the deal, which closed Thursday, were not released. Lexico, a privately held company based in Long Beach, Calif., debuted in 1995 with Dictionary.com.

Altogether, Dictionary.com, Thesaurus.com, and Reference.com had more than 28 million unique visitors in March, according to Lexico.

In May, Ask.com said the acquisition would increase its unique monthly users by 11 percent to 145 million.

According to statistics-tracker Hitwise, Ask.com had 4.23 percent of the U.S. search market in May. Microsoft had 5.89 percent, Yahoo had 19.95 percent, and Google overwhelmed them all with 68.29 percent.