BREAKFAST DEALS: A ravenous Rio?

Rio Tinto's hunger of acquisitions is on the rise but it looks like local iron ore juniors are not on its menu and given that its $US38.1 billion Alcan buy in 2007 nearly sunk the ship it's going to be slow and steady for the miner. Meanwhile, Qantas sharpens its knives for Roll Royce if compensation talks between the two fall over and PBL media's brand makeover looks like another step to an impending float. Elsewhere, JPMorgan faces a $6.4 billion lawsuit as all the chickens come to roost on the Bernie Madoff Ponzi scheme, Leighton's unit Thiess scores a hefty $5.5 billion contract in India and Caltex just can't catch a break from the ACCC.

Rio Tinto

Mining giant Rio Tinto has been in a confident mood of late when it comes to growth, it has already flagged its intention to pour more money into its iron ore mines in the Pilbara and has also shown signs that its appetite for acquisitions was slowly returning. With its balance sheet finally back in rude health thanks to booming iron ore prices the miner finds itself in a somewhat similar boat to its rival BHP Billiton – beef up organic growth options, build growth through acquisitions or return money back to shareholders. Rio has shed some new light on the M&A front yesterday, with the miner's chief executive of iron ore, Sam Walsh, telling the Melbourne Mining Club that its acquisition ambitions do not involve any local iron ore players. According to Walsh, the prices of a number of junior iron ore players were inflated and any acquisition had to add to its existing resources by bringing something new to the table. Given the strength of the miner's burgeoning local iron ore operations Walsh's reluctance in buying local minnows makes sense. The other thing to keep in mind is that Rio doesn't exactly have a squeaky clean track record when it comes to acquisitions, in fact it was an ill-fated acquisition of Canadian aluminium company Alcan three years ago that very nearly proved fatal for the miner. Rio paid $US38.1 billion dollars for Alcan and the ensuing years were more about divesting assets and getting its finances back in order. So big acquisitions are out and while Rio says it's in the mood for "small or medium-sized" acquisitions it will still need to convince its shareholders that it has learnt the lessons from the Alcan fiasco. There are some who reckon a share buyback or a special dividend is not completely out of the picture for Rio shareholders. UBS analysts earlier in the week flagged a possible move in the second half of the next year but given the rate at which Rio is ramping up its capital investment in new mines that option looks to more and more unlikely. Speaking of share buybacks, BHP Billiton chairman Jac Nasser has used the miner's recently announced share buyback to top up his own holdings. Nasser has bought 20,000 BHP American depository shares, which represent 40,000 of BHP's London-listed securities, on-market on the New York Stock Exchange on Tuesday for $1.4 million. He bought the ADRs at $US70.34 ($72.75 a pop) and now also holds 2800 ADRs for BHP's ASX-listed stock, which represent 5600 BHP shares.

Qantas Airways, Rolls Royce

It looks like Qantas Airways is sharpening its knives against engine maker Rolls Royce whose shonky engines almost brought down one of the national carrier's A380's and subsequently grounded the entire fleet. Qantas has been granted an injunction by the Federal Court to pursue legal action against Rolls Royce if the two parties fail to reach a commercial settlement. The important thing for Qantas is that winning the injunction, lodged by law firm Minter Ellison, means that any law suit will be heard in Australia and gives the airline stronger options under the Trade Practices Act. The announcement came just hours after transport regulators stepped up the pressure on Rolls-Royce, pinpointing a "potential manufacturing defect" in its Trent 900 engines and demanding it make them safe. So far the relationship between Qantas and Rolls Royce has been a picture of amity, the engine maker has been suitably apologetic and Qantas says that their talks on compensation and operational issues are making progress. However, the costs for Qantas are rising daily with some analysts saying that the airline has already lost in excess of $100 million since the incident in early November. Factor in the damage to Qantas' brand name and a law suit on home turf seems a pretty card for Qantas boss Alan Joyce to hold up his sleeve.

PBL Media

If you think James Packer is the only guy out there making waves in the media sector at the moment just have a look at his good chum, David Gyngell, who has hit the ground running since taking charge at private equity owned PBL Media. Gyngell has already shuffled the decks at the media group executive ranks, with new managing directors for Nine Network and ACP Magazines and yesterday pretty much removed the final vestige of the Packer name from PBL Media with the decision to change its name to Nine Entertainment Co. Gyngell said that the rebranding was all about highlighting the "identity and simplicity" of the Nine brand and spruiking the "new future” for the media company. That sort of inspirational banter has unsurprisingly added fire to the speculation that a public float of PBL is only a matter of time. PBL's private equity owner, CVC Asia Pacific, is reportedly already aiming for a $5 billion float of the company in March 2011 and a management makeover followed by a corporate re-branding is no doubt designed to make that move easier.

JPMorgan Chase, Irving Pickard, Bernie Madoff

It's almost two years since con man Bernie Madoff was finally arrested for running a Ponzi scheme that fleeced $65 billion from unsuspecting investors and it looks like the trustee charged with the responsibility of finding the lost money for Maddoff's victims has now reportedly turned his attention to JPMorgan Chase. The trustee, Irving Pickard, is suing JP Morgan Chase for more than $6 billion claiming that the bank was complicit in enabling Madoff's multibillion-dollar con. According to media reports, the trustee has alleged that JP Morgan wasn't just willfully blind to the fraud but was at the very heart of it. Irving Pickard has been pretty busy with these lawsuits of late and last month hit UBS and others with a $2 billion suit. JP Morgan has understandably retorted with the usual line that the allegations were "utterly baseless and demonstrably false" and just an attempt by Irving Pickard to grab headlines.

Wrapping up

Caltex Australia just can't seem to catch a break from the competition regulator with the ACCC now kicking up a fuss about the refiner's potential purchase of rival Mobil's fuel terminal at the Gladstone port. Caltex and Mobil own adjoining terminals at Port Gladstone. They are used to store petrol and diesel each company ships into the port. The ACCC has been examining the potential sale for some time and said that any deal will "substantially lessen competition'' in Gladstone's imported petrol and diesel market. It's pretty much the same argument that the regulator used earlier this year to scuttle the planned sale of Mobil's retail network to Caltex, which was subsequently snapped up by 7-Eleven. Oil refiners weren't the only ones on the ACCC's radar yesterday with Japanese brewer Asahi's proposed $360 million takeover of P&N Beverages Australia also raising some eyebrows. The regulator has asked for comment on the proposed acquisition after saying that an acquisition of P&N Beverages could hurt competition on the carbonated drinks market with Coca Cola Amatil and Asahi-owned Schweppes the only remaining players on the field. Leighton Holdings' subsidiary Thiess has scored a heavyweight coal deal in India with the mining contractor securing a $5.5 billion mine development and coal mining contract with NTPC. State owned NTPC, formerly National Thermal Power Corporation, is India's largest electricity generator and Thiess is now set to get the ball rolling on construction of site infrastructure and coal processing plants at NTPC's Pakri Barwadih coal mine. Thiess will execute the project through its 90 per cent owned Indian joint venture company Thiess Minecs. The other 10 per cent is held by Kolkata based Minecs Finvest Private. The Gillard government has jumped on the opportunity to spruik the move as a win for the Australian mining services industry and growing trade relations between Australia and India. Foster's chairman David Crawford has told shareholders that the company is getting closer to pursuing a demerger of its wine and beer businesses, but a final decision has not yet been made. Crawford said if a demerger proposal is recommended by the board and approved by shareholders, it can be achieved in the first half of calendar 2011. In overseas news, Morgan Stanley is set to sell its 34.3 per cent stake in China International Capital Corp (CICC) to Kohlberg Kravis Roberts & Co, TPG Capital, Singapore's Great Eastern Holdings and the island nation's sovereign-wealth fund, according to Bloomberg. Morgan Stanley's stake will be sold in 10 per cent chunks each to TPG and KKR, and about five per cent of its stake to Great Eastern, an insurer controlled by Oversea-Chinese Banking Corp. Finally, PepsiCo is spending big to make its biggest foray into the foreign market and become the biggest food and beverage company in Russia. Pepsi has offered $US3.8 billion to buy a 66 per cent stake in Russian juice and dairy company Wimm-Bill-Dann with plans to buy the remaining shares if it wins a controlling stake.