BREAKFAST DEALS: Alinta's haunting

Alinta Energy's board raises the spectre of insolvency in a bid to get dissident shareholders to back the TPG-led $2.1 billion recapitalisation plan, and with shareholders set to vote on the deal next Tuesday the final result could come down to the wire. Meanwhile, Equinox Minerals' $4.8 billion offer for Lundin gets a boost, Orica raises its hand for Burrup Fertilisers, internet electronics merchant Ruslan Kogan throws down a $1 million-dollar gauntlet to JB Hi-Fi boss Terry Smart and a grim warning for JB shareholders. In the mining space, it's all eyes on Mongolia with Fortescue failing to make the cut for the Tavan Tolgoi coal project and market darling Hunnu Coal set to welcome a strategic partner. Elsewhere, Fairfax beefs up its online presence and former Victorian premier John Brumby gets ready to run MTAA Super.

Alinta Energy, Coastal Capital, Bronte Capital

Alinta Energy's management has moved to squash talk from dissident shareholders that the power retailer can still survive as an entity if the $2.1 billion debt for equity swap engineered by US private equity firm TPG is voted down. The recapitalisation plan, dubbed "Project Amber”, came to light in September last year after Alinta, formerly Babcock & Brown Power, decided to give its senior lenders ownership of its operating assets, minus the Redbank and Oakey power plants. Under the terms of the plan, the operating assets are rolled into a new entity, controlled by Alinta's lenders, while shareholders will receive 10 cents a share for their trouble. However, with shareholders set to vote on the package next Tuesday, a couple of shareholders – Coastal Capital and Bronte Capital –  have voiced their displeasure, saying that 10 cents just wasn't good enough and the utility could continue to trade for another year without having to restructure debt. Well, Alinta's chief executive Ross Rolfe took the opportunity yesterday to put cold water on the assertions, saying that the company had no hope for survival without the recapitalisation plan. Coastal and Bronte have based their claims on Alinta's reported cash balance of $138 million. However, Rolfe said that the real picture is far more precarious, with $86.9 million of the $138 million borrowed from the lenders. That leaves Alinta with a consolidated cash position of $51.6 million and Rolfe warned that if TPG's plan is voted down then it's left with $26.9 million, that's 3.3 cents a share for distribution. With $169 million of debt due for repayment by July 2011, Alinta's management has made it pretty clear that it's restructure or bust for the company. Alinta and its lenders need a yes vote from at least 75 per cent of security holders.  

Weakening Coastal Capital's hand

There is, however, another game afoot between Alinta Energy and Coastal Capital which could have a significant bearing on the final vote. Coastal has only recently bulked up its stake in Alinta through a series of purchases and Alinta has gone to the Takeovers Panel calling for a declaration of unacceptable circumstances with regards to the buying by the US hedge fund. Alinta alleges that Coastal has raised its stake above 15 per cent without obtaining prior approval from the Foreign Investment Review Board and as a result the hedge fund should not be allowed to vote on its entire 16.5 per cent stake. Alinta has also asked the panel to force Coastal to offload its extra 1.5 per cent holding. Coastal's full holdings combined with Bronte Capital's 3 per cent stake could prove crucial to the final vote and Alinta's move to weaken Coastal's hand and raise the spectre of insolvency indicates that it might not be entirely confident that things are going to go its way next Tuesday.

Equinox Minerals, Lundin Mining, Inmet Mining

Equinox Minerals' $4.8 billion hostile bid for Canada's Lundin Mining has received a boost after rival Inmet Mining's growth plans in Panama came under a cloud over the weekend. Lundin has postponed a shareholder meeting on its nil premium merger with Inmet by a fortnight, saying that it will give its shareholders time to receive and review the recommendation of the board in relation to Equinox's unsolicited takeover offer. Equinox is yet to hand in a formal written offer to the target, although one is expected shortly. The Lundin-Inmet merger has come under pressure after possible changes to mining laws in Panama threatened to sour Inmet's $5.3 billion Cobre Panama copper project. Inmet has received equity funding for the project from Singapore's sovereign wealth fund Temasek, but the Panamanian government has now flagged that it may now prevent foreign governments from investing in mining projects. That could see Inmet lose the funding and that means it will have to take on some debt to push the project along. Inmet has maintained that financing the project through foreign investment was still a viable option but Equinox, and no doubt some Lundin shareholders, will be happy that Inmet's troubles will at least give the cash and scrip bid some airtime.

JB Hi-Fi, Ruslan Kogan

The recent brouhaha about online retail stealing the bread from traditional bricks and mortar shareholders seems to have given online electronics retailer Ruslan Kogan a new-found confidence, with the man behind Kogan Technologies issuing a one million dollar challenge to JB Hi-Fi that it will no longer sell Apple products through its stores by March next year. Kogan has issued a statement warning JB Hi-Fi shareholders that the retailer is set to lose 50 per cent of its business to the internet, most importantly the cash derived from the sale of Apple products. Apple products and related accessories make up around 30 per cent of JB Hi-Fi's sales and Kogan suggests that that tap is going to run dry relatively soon. According to Kogan, Apple will eventually pull the plug in its third party distribution network and instead go to consumers straight through the internet. He adds that Apple won't be alone when that time comes with the likes of the likes of Samsung, Sony and LG will also follow suit. All of this adds up to a horror scenario for JB Hi-Fi and its shareholders and it will be interesting to see if JB Hi-Fi boss actually takes the bait. Kogan's stunt may or may not have legs but it is a reflection of the new reality facing traditional retailers.

Orica, Burrup Fertilisers

Burrup Fertilsers' receivers PPB Advisory may still be having trouble getting their hands on the company's absconding co-founder Pankaj Oswal but at least the collapsed ammonia producer is attracting healthy attention from heavyweight suitors. The latest company to formally join the list is Orica, with the explosives maker lodging an application with the Australian Competition and Consumer Commission seeking approval to buy Burrup. Orica has now followed Wesfarmers in confirming its interest for the company. Incitec Pivot and Norwegian chemicals giant Yara, which already owns 35 per cent of Burrup, are also seen as likely contenders for the company.

Mining roundup

Mongolia-focused Hunnu Coal has entered a trading halt ahead of a potential transaction and there is talk that the hot-to-trot coal miner may be about to welcome a strategic partner to the table. According to The Australian Financial Review, Hunnu is bringing in the partner, possibly US coal giant Peabody Energy, through a 15 per cent placement at $1.60 a share. Hunnu has been one of the mining sector darlings since its debut in February last year and has since delivered a solid return to investors. With coal plays in Mongolia picking up steam, Hunnu, which has nine exploration licenses in five provinces across the country, has been seen by many as a takeover target. In other Mongolian mining news, Fortescue Metals Group has failed to make the cut as a bidder for Tavan Tolgoi coking coal deposit, with Arcelor Mittal, Vale, Xstrata, Peabody Energy, Mitsui and a Korean consortium making up the shortlist. Meanwhile, Gujarat NRE Coking Coal is reportedly one of the two Indian suitors currently wooing Whitehaven Coal. The list of other possible candidates includes Lanco Infratech, Adani Group and Indian industrial conglomerate Essar.

Wrapping up

Fairfax Media has beefed up its online transaction business with the $29.1 million acquisition of online holiday rental and corporate accommodation business Occupancy Pty Limited. Occupancy lists over 25,000 holiday rental properties through two consumer websites, Rentahome.com.au and Takeabreak.com.au. Fairfax chief Greg Hywood said that the buy would be good fit to the travel and holiday component of its online transactional portfolio, which includes Stayz.com.au, Holidayhomes.co.nz and Bookit.co.nz, and the media company will now combine Stayz and Occupancy into one unit. Fairfax is paying $17.9 million in cash and $11.2 million worth of shares in the Stayz/Occupancy combo. Occupancy's current shareholders will hold a 10 per cent stake in the new business with Fairfax keeping the rest.

According to Fairfax, the buy represents an earnings multiple of 9.1 times, based upon the anticipated 2001 calendar-year EBITDA of Occupancy. Meanwhile, Carlyle Group's  $116.3 million move to take a 15 per cent stake in Chris Corrigan's Qube Logistics has won approval from the FIRB. Qube sealed the agreement with Carlyle Infrastructure Partners in February, under the terms of which CIP will unconditionally take a 6 per cent stake in the company for $46.3 million and conditionally acquire a  9 per cent stake for $70.3 million. It's this transaction that needed FIRB's approval and with that now done Qube unitholders will vote on the conditional placement in early April. Elsewhere, AMP and AXA Asia Pacific Holdings have crossed the final hurdle in sealing their multi-billion dollar deal, with the Supreme Court of Victoria giving the deal its approval. A copy of the court's orders will be lodged with the Australian Securities and Investments Commission today, at which time the schemes will become legally effective. In other news, the Motor Trades Association of Australia Superannuation Fund (MTAA Super) has appointed former Victorian premier John Brumby as chairman. Brumby will start the job on April 4 and will replace interim chairman David Lloyd. The $6 billion MTAA Super has approximately 290,000 members around Australia.