Atlas Iron and QR National could be about to change the balance of power in the Pilbara. Reports indicate that the pair is poised to announce a feasibility study into building a railway line for smaller miners, breaking the infrastructure stranglehold that the big three iron ore miners enjoy in the region. Spotless Group has apparently floated a third takeover idea to break talks with Pacific Equity Partners into something real. Elsewhere, Rio Tinto has become the subject of speculation about a UK-listed mineral sands miner, CVC Asia Pacific has received a dose of good news and bad news for its Nine Entertainment defence and Andrew Forrest is playing white knight with a small gold miner.
Atlas Iron, QR National
Atlas Iron is on the brink of announcing a feasibility study in conjunction with QR National to build a multi-billion dollar railway line in the Pilbara for junior and mid-tier producers. According to media reports, the study could be announced as soon as today, giving smaller players in the area a chance to move their product from east of the Pilbara to Port Hedland Port, without having to deal with the big three producers Rio Tinto, BHP Billiton and Fortescue Metals Group.
Finding iron ore is a relatively simple exercise compared to finding a place to ship it from in a cost effective manner. Rio, BHP and Fortescue guard their infrastructure carefully. Gina Rinehart’s Hancock Prospecting is constructing its own railway to connect the Roy Hill project – the one that’s pushed Rinehart’s net worth to $20 billion – to Port Hedland.
It won’t be just Atlas Iron that’s set to benefit from any new rail line. Brockman Resources, currently being mopped up by Hong Kong’s Wah Nam International, and Flinders Mines, currently being pursued by Russia’s Magnitogorsk Iron & Steel, are both in line to benefit. Curiously, both of these suitors have hit problems in their quest to nab their targets, although it looks like the rewards could be substantial.
Spotless Group, Pacific Equity Partners
Spotless Group has reportedly emerged from the ANZAC Day break with a possible third takeover proposal. The cleaning and services group, which entered a trading halt on Tuesday, is talking to private equity suitor Pacific Equity Partners about a cash payment and deferred obligation for the target’s shareholders, according to News Limited. The report says it’s understood that it was Spotless that introduced the idea, where shareholders would be allowed to take the $2.68 a share that PEP came up with, or accept a lower offer plus a bond or note.
News Limited also says the extra obligation would not be linked to any sale of Braiform, Spotless’s coat hangar business. Braiform has been put forward as a likely sale candidate for PEP if it gets a hold of Spotless. The problem for the two companies is to figure out what it’s worth. The Australian Financial Review says Spotless believes the business is worth $220.4 million, most of which is from goodwill, while PEP is far more sceptical.
Rio Tinto, Kenmare Resources
Speculation emerged over the ANZAC Day break that Rio Tinto is having a look at mineral sands miner Kenmare Resources. London’s Telegraph reported that Rio made an informal approach to the London-listed company of 65 pence a share and is poised to consider an improved 72 pence proposal, worth a total of £1.2 billion ($1.9 billion). The theory is that Rio would be able to link up Kenmare’s headliner Moma project in Mozambique with its own Mutamba exploration project. But other reports have indicated that nothing is definite.
Meanwhile, Rio is busy pumping up the credentials of its diamond division, which is under review (up for sale). News Limited reports that Rio has told US investors that the sector is good place to be in given the decline in supply and the increase in demand, adding that a different ownership structure could make a difference. This certainly makes one think of reports that private equity firm Kohlberg Kravis Roberts is hoping to secure Rio’s diamond arm, along with that of BHP Billiton, to combine the two. Is Rio trying to encourage someone else to adopt this strategy?
CVC Asia Pacific, Nine Entertainment
CVC Asia Pacific has received some good news in its quest to hold on to Nine Entertainment. The Australian says sources indicate that the valuations for the company’s events business, which includes Ticketek and Allphones Arena, are pushing towards $600 million. That’s an encouraging valuation and a great boost for CVC, which is trying to find a way to deal with $2.7 billion in debt that matures early next year.
However, reports also indicate that Japanese lender Mizuho sold $45 million in Nine’s debt for 88 cents in the dollar. It’s not clear whether CVC’s antagonists, Apollo Global Management and Oaktree Capital, added to their holdings of Nine debt.
Thakral Holdings, Brookfield Asset Management
Listed Australian property developer Thakral Holdings says a $410 million takeover proposal from Brookfield Asset Management just isn’t enough. Chief operating officer Anthony Story said the offer undervalues the company and, while it would commission an expert report once a bidder’s statement, he expects the experts to say it’s a bad deal.
The offer of 70 cents a share might be a 30 per cent premium to the previous trading price, but Thakral argues that it has a net tangible asset backing of 96 cents per share. Some of you might remember that Brookfield really announced itself to the Australian market in 2007, when it picked up construction company Multiplex for $7.3 billion.
Coopers Brewery, Mr Beer
Australia’s largest locally owned beer company, Coopers Brewery, is flying the flag in the United States, snapping up the country’s largest home brew brand, Mr Beer. Coopers didn’t release the price of the deal, merely describing it as "multi-million dollar”. Coopers, which has just four per cent of the Australian beer market, is the world’s largest producer of home brew concentrates and sculling Arizona’s Mr Beer will make it the largest maker of home brew supplier in the US. Coopers is celebrating its 150th anniversary this year, with a drink at home.
Iron ore billionaire Andrew Forrest has forked out $18 million for a 19.9 per cent stake in a battling junior gold miner called Apex Minerals. Apex might seem like an appropriate word, given that Forrest paid 30 cents a share, a 50 per cent premium to Apex’s recent capital raising at 20 cents a pop. However, Apex was trading above $1.10 a share in September last year, so maybe Forrest sees some potential in this junior. Still in resources, Paladin Energy boss John Borshoff says worries about the company’s short-term debt situation have been largely addressed by its $US274 million convertible bond issue.
Meanwhile, Ten Network is reportedly getting closer to selling its outdoor advertising business EYE Corp. The Australian Financial Review says that exclusivity is expected to be handed out next week, with Australia’s APN News & Media, oOh!media and France’s JCDecaux Group vying for the business.
And finally, the Gold Coast’s Palazzo Versace hotel has been put on the market and is expected to fetch up to $80 million, Fairfax reports.