BREAKFAST DEALS: ACCC showdown

The ACCC sticks to its guns with regards to the Metcash-Franklins deal and, with the regulator appealing the Federal Court's decision, Franklins could be facing the prospect of a break-up, with individual stores up for grabs – a move which could potentially end up helping Woolworths and Coles. The ACCC's stance isn't just about competition in the grocery sector but also about testing the legal boundaries that could well dictate whether it decides to stand in the way of the Foxtel-Austar merger. Meanwhile, CBA gets more aggressive on home loans competition, while NAB's potential JV in the UK continues to have its doubters. In other news, Thailand's Banpu looks to follow up its $1.9 billion Centennial Coal acquisition with a friendly offer for Mongolian-focused Hunnu Coal and Qantas' Asian plans may take a little bit longer to bear fruit. Elsewhere, Woolworths welcomes Myer's head of merchandise back to its fold and Brambles holds off on getting the ball rolling on the sale of Recall.

ACCC, Metcash, Franklins, Foxtel

Australian Competition and Consumer Commission chairman Rod Sims has evidently decided to make his mark as the new chairman of the competition watchdog, with his decision to appeal the Federal Court's judgement with regards to Metcash's $215 million deal to buy supermarket chain Franklins. The ACCC's initial thrust to prevent the deal was dented by the court's ruling two weeks ago but Sims is sticking to his guns. The regulator has based its appeal on two key points: a Metcash-Franklins deal is not in the best interests of independent retailers and the court's interpretation of what defines a market and the validity of the regulator's counterfactual – what would happen in the market if a merger didn't proceed – was incorrect. Interestingly, Sims is not only adamant that the court has made some significant errors but is also confident that there is a consortium of independent grocery retailers that were keen to take Franklins off the hand of its owner Pick'n'Pay. Well, the jury is out on that claim because no one has put their hand up in the last nine months and with the Metcash deal now on further hold, the Franklins chain could be facing the prospect of being broken up with the stores sold individually. Many will see that scenario playing into the hands of Woolworths and Coles despite assurances from Sims over the weekend on ABC's Inside Business that the ACCC will closely monitor any attempt by Woolworths or Coles to buy any of the stores up for sale. Now, Sims could have easily written this loss off as a legacy of his predecessor but the decision to appeal isn't just about supermarkets – it's also about testing the legal boundaries and the ACCC's ability to block anti-competitive mergers. Sims has quite a few big fish on his plate at the moment, especially the Foxtel-Austar merger, and the ACCC's decision to appeal the Metcash ruling sent a shiver down the spine of Austar shareholders last Friday, with many worried by the potential implications. The regulator was set to announce its final decision on that deal on September 8 but that has now been pushed back to an unspecified date. The ACCC's market definition – that Foxtel and Austar solely operate in a narrow pay TV market – and its counterfactual argument that the NBN will substantially increase the incentive for the two operators to compete against each other are both sailing the same waters as the Metcash-Franklins deal. Whether or not the ACCC is successful in its appeal against the Metcash ruling could have an impact on how the pay TV tie-up plays out but Sims should probably get ready for another legal stoush, because Foxtel and Austar's majority owner Liberty Media has both the time and money to mount a legal challenge. Meanwhile, Foxtel has reportedly been lent a helping hand by two free-to-air networks, with The Australian reporting that both Seven and Ten have lodged separate submissions of no objection to the Foxtel-Austar merger with the ACCC.

CBA, NAB

Commonwealth Bank of Australia has decided to get aggressive on home loans and a week after dropping its interest rates by up to 0.16 per cent for one- and three-year fixed rate packages, the bank has now vowed to beat the advertised mortgage rates of its three major rivals – ANZ, NAB and Westpac. The guarantee will be available until the end of September to new customers who borrow a minimum of $100,000, as well as existing customers who take out new borrowings of $100,000 or more. Now, this may look like a volume-chasing strategy by CBA, but the executive general manager of retail products at CBA, Michael Cant, has told the Australian Financial Review that it's all about maintaining a balance between keeping competition alive and focusing on margins. He also doubted whether the promotion, which could potentially be extended, will be interpreted as price signalling by the ACCC. Meanwhile, the release of the independent banking commission report on the UK's banking sector is unlikely to have any impact on where National Australia Bank stands with regards to its plans in the UK. A full-blooded pitch for Lloyds' 627 branches is pretty much out of the question and there are more question marks about the possible deal with NBNK. According to the AFR, NAB is only keen to sell its UK units if it gets a full and fair price for them and it would much rather contemplate a joint venture with an existing bank than a well-connected but cash-poor cash box like NBNK. If NAB is unwilling to budge without a fair offer, then NBNK needs to put at least three billion pounds on the table and there are doubts whether a company with 50 million pounds in capital will be able to rustle up that kind of money.

Hunnu Coal, Banpu Coal

Mongolian-focused coal explorer Hunnu Coal is reportedly in the sights of its biggest shareholder Banpu. Thailand's top coalminer already owns a 12.4 per cent stake in Hunnu, and according to the AFR, is set to lodge a friendly $375 million offer. Banpu bought its existing stake in March for $45 million and the miner said at the time that a company like Hunnu was just what it needed to get access to the coal sector in Mongolia, which has extensive coal deposits and is in close proximity to key markets like China and India. Hunnu has a strong position in thermal and coking coal deposits in South Gobi, Mongolia. It is exploring 10 coal development projects, two of which have combined coal resources of more than 400 million tonnes. In May, Hunnu bought Rio Tinto Mineral Development's controlling stake in the Altai Nuurs coking coal project. Hunnu is picking up the 70 per cent stake for $40 million, with a cash payment of $23 million on signing and a further $17 million in deferred payments. It's also one of the few miners operating in Mongolia that is relatively close to existing or planned infrastructure in the area. This will be Banpu's second acquisition in Australia after it bought Centennial Coal for $US1.9 billion last year as part of a regional expansion drive, and the AFR reports that the Hunnu deal is expected to be similarly structured. Hunnu listed in February, raising $200 million at 20 cents a share, and has since seen its fortunes rise with its shares trading at $1.38 before going into a halt last Friday.

Qantas, Tiger Airways

Moving to the aviation sector, Qantas' Asian revamp may be taking a little longer to put together than expected, with the Australian Financial Review reporting that the airline's plans to launch a new offshore-based premium carrier may not be realised until early 2013. Singapore and Kuala Lumpur have both been touted as candidates to serve as a potential base of operations for the new airline, and the paper reports that talks to establish a joint venture in either of those locations are still underway. A decision on the location is reportedly expected by the end of the year, while winning all the regulatory approvals is expected to take another 12 months. Meanwhile, Tiger Airways may be looking to hand over the reins of its Australian operations to a former Virgin Blue executive, with The Australian reporting that former Virgin chief operating officer Andrew David  could be set to take the hot seat after the departure of Tony Davis. Davis is set to leave the airline in November and will be replaced at the helm of the Singapore-based parent company's helm by Chin Yau Seng.

Wrapping up

Department store Myer's decision to let its head of merchandise, Penny Winn, leave, is going to prove to be a great win for Winn's former employer Woolworths, which wasted no time in getting her back on board. Winn is set to leave Myer in December and will join Woolworths as head of multi-channel activities. According to Fairfax papers, the departure was set in motion after Winn was informed that she was not in the running for the top job at the department store once CEO Bernie Brookes' contract expires. Well Myer's loss is Woolworths' gain, especially as the supermarket giant looks to build growth in the online space. It's a space that Winn is well versed with given her involvement in Myer's recently launched online site Myfind.com, and interestingly, Brookes has told the AFR that the department store is seeking board approval to next month increase its e-commerce capabilities. Meanwhile, the issue of whether NRMA is in apparent breach of a shareholding agreement with Insurance Australia Group has been revived, with Fairfax papers reporting that the NSW motoring group has offloading nearly 11 million IAG shares over the past year. NRMA's holding is now reportedly at 18.4 million shares while the papers report that, under a demutualisation agreement signed between the two firms 11 years ago, NRMA is prohibited from selling below 29.3 million shares. Both companies have refused to comment on the situation but told Fairfax papers that they maintain a positive business relationship. In other news, the AFR reports that market volatility has forced Brambles to hold off from getting the ball rolling on the sale of its document services business Recall. The formal sales process was set to start last week but is being held back until conditions stabilise. The paper adds that the unit has already attracted substantial interest, particularly from US private equity operators.