PRESS DIGEST-Australian Business News - July 11

THE SYDNEY MORNING HERALD (www.smh.com.au)

British energy company BG Group yesterday sought to promote its A$13.7 billion bid for Origin Energy (ORG.AX) while releasing its bidder's statement. BG chief executive Frank Chapman dismissed suggestions that the proposed export-focused merger would cause a surge in domestic gas prices, terming the claims "economically not rational.' The bidder's statement ruled out significant staff redundancies, and confirmed plans to retain Origin's Sydney headquarters and sell Origin's majority stake in New Zealand's Contact Energy (CEN.NZ). Page 23.

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Analysts have welcomed the refined growth strategy of general insurer IAG (IAG.AX), unveiled on Wednesday by chief executive Michael Wilkins, but questioned the lack of accountability of the IAG board for the company's problems. "Acceptance of accountability by the board is a necessary step toward restored credibility in the marketplace,' said Andrew Kearnan, an analyst at broker Merrill Lynch. Citigroup made a similar assessment. IAG shares closed down 5 cents at A$3.61 yesterday. Page 25.

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Retail Food Group (RFG.AX) yesterday upgraded its earnings-per-share forecast by 17 percent on the previous estimate, despite predicting flat growth in customer numbers. The company owns the Donut King, Brumby's Bakeries and Michel's Patisserie chains, the latter two acquired last year. Chief executive Tony Alford said the affordability of the food sold at its outlets ensured customers wouldn't hesitate "spending A$4.50 for a coffee and a donut,' helping Retail Food Group ride out the consumer downturn. Page 26.

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Broker JPMorgan has warned in a report that sales of "step-up' and premium food and drink products could suffer in the economic downturn. "Step up' brands are priced about 15 percent more than regular products, while premium brands are 30 percent more expensive. Analyst Stuart Jackson predicted "a cessation, or even a reversal, in trading up by consumers,' potentially affecting beverage producers including Lion Nathan LNN.AX, Foster's (FGL.AX) and Coca-Cola Amatil (CCL.AX). However, Mr Jackson expected beer sales to remain unaffected. Page 26.

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