BREAKFAST DEALS: ASX spotlight

Wayne Swan's looks set to reveal his reasons for sinking the ASX-SGX merger with a full overhaul of the financial settlement also in the wings. Meanwhile, NBN budget blowout fears gather steam and former Leighton supremo Wal King's presence on Ausdrill's board is a hit with investors. Elsewhere, Rio Tinto becomes the top dog on Riversdale Mining's register, Gina Rinehart gets closer to sealing a $8 billion coal deal with India's GVK Power, more behind the scene details from the Seven-James Warburton bust up, and is Colorado's major creditor looking to buy out the retailer?

ASX, SGX, Wayne Swan

The Singapore Exchange hasn't raised the white flag with regards to a merger with ASX Ltd despite its current $8 billion offer being effectively dead in the water. It looks like the SGX isn't satisfied with the limited explanation provided by the treasurer Wayne Swan and the Foreign Investment Review Board and is pressing for more information, which would indicate that it may still be keen to find an alternative. And it looks like the SGX's wish for clarification may be answered sooner than expected, with the Australian Financial Review saying that treasurer Swan could reveal his concerns as early as Sunday, when the official 30-day bid process ends. One of the major sticking points for the government has been concerns about handing SGX the keys to the clearing and settlement systems, which could heighten the risk of systemic failure. So it would seem that Swan's reticence is purportedly less about nationalistic sentiment and more about regulatory security in case of another financial crisis – and as the AFR reports he is about to do something about it. According to the paper, the treasurer is also poised to announce a major overhaul of the Australia's financial settlement system, which is aimed at giving our regulators the power to intervene in the operations of settlement systems in case of trouble, without having to go to authorities in other jurisdictions, in this case Singapore. If the reports are on the money then it will be interesting to see how the SGX will react to them and more importantly what impact would it have on the ASX's future. Goldman Sachs analysts reckon that the SGX is unlikely to play ball because it will find it difficult to give more control to the ASX and still justify the premium it's paying for the target. So where does that leave the ASX? Well, it could decide to fly solo for a while and there is always a chance of a tie-up with the Hong Kong Exchange, although the jury is out on how much political support that deal may have. The other thing to keep in mind is that the ASX could play the predator and not the prey; as Goldman Sachs analysts put it there aren't a lot of exchanges out there with the muscle to offer the ASX substantial premium so the shoe could be on the other foot the next time around.  

NBN budget blowout fears

The federal opposition's communications spokesman Malcolm Turnbull must be enjoying the sight of the NBN Co muddling its way through the preliminary stages of the construction of the national broadband network and he might yet receive more ammunition to stick it to his government counterpart, Stephen Conroy. The original tender process has already fallen by the wayside and was one of the key reasons for the departure of the head of the NBN Co construction arm Patrick Flannigan – and concerns about whether the $36 billion budget is going to be enough for the project have been further heightened after two of the construction companies shortlisted by the NBN Co told The Australian that cost of the capital works for the project could surge more than 50 per cent above forecast unless the NBN Co takes on more risk and liability. The contractors are angry that the original tender process put all of the risk associated with the liability on them. There is a new tender process reportedly underway to find a single contractor, with Downer EDI, Telstra, Leighton Holdings' unit Silcar, Service Stream and Visionstream all in the new shortlist. The cost blowout fears haven't been helped by the comments by the head of NBN Co's procurement arm, Kevin Brown, who told ABC radio that he was reasonably confident of getting things done within budget but could tap the government for more funds if needed. This is gold for Turnbull, who after failing to stop the project in parliament has seized the opportunity to throw some well aimed broadsides at the government.    

Wal King, Ausdrill, Macmahon Holdings, Barminco

It look likes the appointment of former Leighton Holdings supremo Wal King as deputy chairman has given mining services group Ausdrill the necessary polish to start making some waves in the sector. Ausdrill launched a $149.5 million capital raising a day after welcoming King to its board and by all accounts the raising has been a roaring success. So with new funds in the kitty there is talk that Ausdrill is now set to embark on acquisition trail, with joint venture partner in Africa Barminco, and Macmahon Holdings, in which Leighton holds a 20 per cent stake, reportedly on its radar. According to the Australian Financial Review, Barminco, which has been put on the block by its owner, Gresham Private Equity, is valued at around $600 million to $700 million. And that means that Ausdrill will probably need more funds. According to Fairfax papers, buying Leighton's 20 per cent stake, worth around $80 million, may be a more palatable option and one that gives Ausdrill greater access to heavyweight mining contracts.

Mining wrap up

We start with Rio Tinto which is now the largest shareholder in its $3.9 billion target Riversdale Mining. The mining giant now has a 49.49 per cent stake in the coal miner surpassing The combined stake of India's Tata Steel and Brazilian steelmaker Cia Siderurgica Nacional SA. It went right down to the wire but Rio has reached its 47 per cent target for acceptances by April 6 and that means the bid price has been raised to $16.50 and Riversdale shareholders now have until April 20 to make the most of it. Meanwhile, it looks like talks between Gina Rinehart's Hancock Prospecting and India's GVK Power have ticked up a notch, with GVK reportedly close to picking up the Alpha Coal and Kevin's Corner mine in a $8 billion deal. According to The Australian, GVK and Hancock have signed an agreement to continue exclusive talks until mid-May to seal the transaction.

Moving to iron ore, BC Iron has scored a victory over its erstwhile suitor Regent Pacific with the Takeovers Panel forcing Regent Pacific to come back to the table. Regent's recent back flip had forced BC Iron to go to the panel, which has now ruled that the suitor had failed to disclose to the market that it had reserved the right to drop the bid in certain circumstances. Regent Pacific had originally cited opposition from BC's biggest shareholder Consolidated Minerals as its reason for scrapping the bid but has now highlighted that its deal was also contingent on obtaining debt financing. It looks like Regent Pacific can't rustle up the $209 million and may instead choose to pay the $500,000 break fee and walk away.

Wrapping up

While the lawyers of Seven Media Group and its former employee James Warburton continue to argue over whether Warburton was asked to leave the network immediately or sent on gardening leave the legal tussle continues to reveal juicy behind the scenes information. One thing to come out so far has been just how tenuous the partnership between Seven and Ten Network Holdings has been with regards to the joint bid for AFL rights, negotiations for which by the way are expected to drag on for a while. The other interesting piece of information is a number on just much an advertising cash cow Masterchef is for Ten. According to The Australian the network earns around $60 million a year in gross revenue. Of course, we should get a clear picture of Ten's strategy when acting CEO Lachlan Murdoch presents the network's results. Keep an eye out for a possible announcement for a brand new Sunday talk show from conservative columnist Andrew Bolt. Moving to the retail sector, lingerie retailer Bras N Things' owners have postponed its planned $300 million IPO and a trade sales process after failing to find the right price. Meanwhile, the AFR reports that collapsed retailer Colorado Group may be in the sights of Japanese investment bank Nomura. According to the paper, Nomura, which holds a sizable portion of Colorado's $259 million senior debt, is working with three hedge funds on a buyout proposal. Finally, in private equity news, Kohlberg Kravis Roberts has joined forces with Taiwanese component maker Yageo Corp's founder and chairman, Pierre Chen, to buy the company for $US1.6 billion. Chen has told his colleagues in a letter that Orion Taiwan (jointly owned by his family and KKR) was keen to take the company private. The $1.6 billion deal is the biggest private equity buyout in Asia so far this year, according to Thomson Reuters.