BREAKFAST DEALS: Arrium abandoned

Arrium's share price may tank after it rejected Steelmakers' revised offer, while GrainCorp fights for the right price.

Arrium emerges this morning without a suitor officially at the table, so its share price could easily lose quite a bit of ground. But apparently, Steelmakers Australia is still conducting discussions, just not directly with Arrium. GrainCorp is also fighting for its rightful valuation, as another bidder reportedly runs some numbers. Meanwhile, its fight night (or day rather) at Whitehaven Coal, some of Australia’s largest contractors are standing a little taller and Telstra has picked up a deal with the Department of Defence.

Arrium, Steelmakers Australia

The Asian consortium bidding for Australian steelmaker Arrium fired a few parting shots at the company’s board yesterday as its abandoned its improved $1.2 billion takeover offer.

It was an eventful day for Arrium, starting with news released to the market that Steelmakers Australia, led by Hong Kong’s Noble Group and South Korea’s POSCO, had come back with an offer of 88 cents per share, which was a 17 per cent improvement on the previous 75 cents offer.

But the Arrium board, led by chairman Peter Smedley, was still unimpressed with the conditionality of the deal, particularly the uncertainty surrounding finance. The improved offer was promptly rejected.

By the end of the day, Steelmakers had had enough. The consortium released a statement saying they would "cease seeking engagement” and were "deeply disappointed” with the Arrium board.

"Steelmakers Australia believes Arrium faces significant competitive challenges across its business units and its high financial leverage significantly reduces its options in terms of deploying capital and technology into its steel-making business that Steelmakers Australia believe is necessary to ensure its long-term future,” said the consortium.

So what happens now?

Firstly, Arrium has to continue to reassure its investors that the company won’t be brought to its knees by a plunge in the iron ore price either by strengthening its operations or demonstrating that slide towards $US80 per tonne was an outlier.

According to The Australian Financial Review, Steelmakers representatives from Noble and POSCO have spoken to South Australian government officials. Discussions with the federal government apparently took place on Saturday.

But before all that, the company’s 74.5 cent share price might take a spill this morning.

GrainCorp, Archer Daniels Midland

Another Australian company that’s trying to strike a balance between protecting shareholders from a lowball offer and encouraging a potentially powerful bidder is GrainCorp.

The eastcoast grain handler is target number one of the Australian agricultural industry and its suitor, American giant Archer Daniels Midland, has a $2.7 billion proposal on the table.

Media reports have indicated in the last 24 hours that Russian investment company Summa Group has been exploring funding options for a possible tilt at GrainCorp. The presence of ADM as a rival has apparently made them less confident of securing the Australian grain company and it’s not clear whether they’ll throw their hat in officially.

Back in Australia, ADM is talking up the merits of the bid by talking up the future of global agricultural markets.

"The fundamental trends in the industry are not only population growth but incredible social transformation as people move from $2 a day income to a little bit higher than that,” chief operating officer Juan Luciano told The Australian Financial Review.

Whitehaven Coal, Nathan Tinkler

Today’s the day for the showdown between Whitehaven Coal and its largest shareholder Nathan Tinkler.

It’s been a curious build-up. Tinkler spoke so warmly about the merits of a merger between his old vehicle Aston Resources and Whitehaven. Now he wants to replace chairman Mark Vaile, kick out the board and replace some of the miner’s management. A succession plan is already underway for managing director Tony Haggarty.

"I can’t stand by – I’ve got far too much invested to stand by and watch this thing continue to fail,” Tinkler said in an interview with The Australian Financial Review from his recently adopted home-base in Singapore.

This appears to put a bullet in reports from earlier this week that Tinkler was trying to pay off some debts and restructure his personal liabilities in advance of another potential crack at taking Whitehaven private.

It appears he just wants to control it, not buy it.

At present Tinkler has 19.4 per cent of the company, just beneath the level where a stake cannot be increased faster than the rate allowed by creeping provisions without a takeover offer.

In an interview with The Australian, Tinkler indicated his desire to buy more shares in Whitehaven (good timing, given the state of the share price).

"The market is materially uninformed...Tony (Haggarty) and the board have never run a company that would be judged by productivity and profitability before, they have only run companies all full of potential, so to speak,'' said Tinkler.

"They are not full of potential anymore, their assets are built, they should be running."

Macmahon Holdings, Drillsearch, Acer Energy

Contractor Macmahon Holdings has given investors some much needed good news, with the announcement that it has been named preferred bidder for a $1.8 billion, five-year contract with iron ore miner Fortescue Metals Group.

Macmahon would deliver open cut mining services to aid the expansion of Fortescue’s Christmas Creek mine in the Pilbara.

It’s a crucial boost for Macmahon, which copped a serious share price knock in September, following its decision to slash profit guidance on the back of problems with the rail construction deal it has with Rio Tinto in the same iron ore area.

Meanwhile, Drillsearch has gone unconditional in its $132 million bid for Cooper Basin junior Acer Energy.

The company has secured more than 40 per cent acceptance and the chances of fellow major shareholder Senex Energy emerging with a proposal compelling enough to stop its progress is looking less and less likely.

Leighton Holdings

Turning to the biggest local contractor of them all, Leighton Holdings is reportedly poised to launch a private debt placement on US debt markets.

The Australian Financial Review brings word from sources indicating that JP Morgan and HSBC, which are close to Leighton, would lead manage what’s called a benchmark 144A deal, after discussions in late September.

The newspaper says the launch is slated for the next few weeks, with investors in Asia and the US likely to feature.

Genworth Financial

IPO heartbreaker Genworth Financial has again cast doubt on the timeline for its proposed float of 40 per cent of its Australian business on the ASX.

In the company’s third quarter results, where it reported an improvement in earnings for the Australian market and a decline in delinquencies, Genworth seemed to indicate that its $800 million IPO could be delayed until well into 2013.

"Adverse market or other conditions might further delay or impede the planned IPO of the company’s mortgage insurance business in Australia,” the firm said.

Genworth was the central focus of IPO watchers earlier this year, with hopes that a successful float could shock the sector out of its funk.

China National Offshore Oil Corp, BG Group

The major forces divvying up Australia’s growing LNG industry have made another deal.

China National Offshore Oil Corp has signed a heads of agreement with Britain’s BG Group over the Queensland Curtis LNG project over a series of ownerhip adjustments culminating in a $2 billion deal.

CNOOC’s stake in the first train at QCLNG jump to 50 per cent from 10 per cent and its share of the tenements in the Walloons Fairway site will jump to 25 per cent from 5 per cent. It will also receive a 25 per cent working interest in a few upstream tenements.

In return, CNOOC will fork out $2 billion to BG and reimburse billions of dollars in construction costs. The deal will make BG the largest supplier of LNG to China.

Wrapping up

Telstra told investors that it has picked up a $150 million contract with the Department of Defence, as it outlined its growth strategy to investors yesterday.

Telstra is now a 50:50 owner of pay TV company Foxtel with News Limited. Consolidated Media shareholders voted in favour of a $1.94 billion takeover bid from News, the owner of this website, which delivered billionaire James Packer a $1 billion payday.

The billionaire was forced to dismiss speculation once again that he might use the proceeds to buy back into Nine Entertainment. Quite how anyone can imagine a scenario where Nine’s hedge funds could fight as hard as they did for control of Nine, only to allow Packer a window back in is beyond this columnist.

And more to the point, he’s a gaming man now not a gameshow man.

Speaking of the free-to-air broadcasters, Ten Network has struck a new sales agreement for EYE Corp with CHAMP Private Equity.

The headline price is $113 million, with $98 million payable on completion of the deal and $15 million in another three years.

Meanwhile, AMP Capital Investors has picked up a 49 per cent stake in Newscastle International Airport in the UK. The deal was announced at the same time as a refinancing agreement for the airport, which also included another local, National Australia Bank.

And finally, the house of Pratt is again in the sights of the Australian Competition and Consumer Commission, if it ever left them at all.

The consumer watchdog is investigating the purchase of Drum Recondtioners by Pact Group, the company of late Richard Pratt’s son-in-law Raphael Geminder.

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