BREAKFAST DEALS: ASX's big fish

Less than a month after telling the market that it was looking at merger options ASX Ltd's mega-deal with the Singapore Exchange could see a hefty premium for the local bourse operator's shareholders, while BHP demands a speedy resolution to the regulatory rigmaroles in Canada. Elsewhere, regional TV veteran Bruce Gordon lifts his stake in Ten Network under the cover of James Packer's share raid, Hochtief looks to enlist Qatar in its defence against suitor ACS and could Telstra be on private equity radar?

ASX, Singapore Exchange

Local stock exchange operator ASX Limited (ASX) and its suitor Singapore Exchange (SGX) are set to outline the details of their proposed $16 billion cash and scrip merger today with SGX reportedly set offer as much as $48 a share for the target. The ASX is currently valued at around $6.1 billion but the SGX offer will value it well over $8 billion. The move comes less than a month after ASX told the market that it was in talks with a number of parties with regards to a tie-up. SGX was seen at the top of the pile of contenders at the time and the merger play came into light last Friday after both bourse operators decided to go into trading halts. The combination would be the first between two exchange companies in the Asia-Pacific region and while no one doubts the compelling rationale behind the deal – lower costs, increased scale and a greater exposure to Asian investment – the focus for the moment is on the premium SGX is willing to offer ASX's shareholders. At $48 a share the offer reflects a 37 per cent premium over ASX's last traded price of $34.96 and while the final price range is still being finalised a hefty premium is on the cards. With ASX boss Robert Elstone set to hang up his boots in 2011 it looks like SGX chief Magnus Bocker is the most likely candidate to lead the combined entity with ASX chairman David Gonski to take a deputy chairman role. Bocker, who joined the SGX last year, boasts a mighty record when it comes to consolidation and new technology. His three year CEO tenure at Scandinavian exchange operator and technology group OMX saw a flurry of integration between seven northern European national exchanges and Bocker was the man pulling the strings at NASDAQ after the US technology exchange took over OMX in 2008. So with a solid pedigree and an attractive premium SGX's offer looks like a winner, however, there is that issue of regulators. Any deal will need a host of approvals from the Reserve Bank of Australia (RBA), Australian Securities and Exchange Commission (ASIC) and the federal treasurer Wayne Swan. Then there is the issue of the necessary amendment to current laws that restrict individual shareholders to a 15 per cent stake. SGX is partly owned by the Monetary Authority of Singapore and the prospect of foreign ownership of a national asset will no doubt raise a few eyebrows in Canberra. ASX is being advised by UBS and Freehills, while SGX has recruited Morgan Stanley and Clayton Utz.

BHP Billiton, PotashCorp

BHP Billiton continues to talk tough on its hostile bid for Potash Corporation of Saskatchewan (PotashCorp) despite fears that the $US40 billion deal may be knocked back by Canadian regulators. While the government in Saskatchewan has failed to see any net economic benefit arising from the deal the final decision rests with Investment Canada and is set to be handed down on the first week of November. While many expect that deadline to be extended BHP's man in Saskatchewan Andrew Mackenzie has told Bloomberg that contrary to expectations the miner is ''not that interested'' in an extension. From the looks of it BHP non-ferrous metals chief Mackenzie was in a feisty mood, saying that the miner had laid out all the facts and the regulatory side of things should be cleared up sooner rather than later. BHP's offer to PotashCorp's shareholders closes on November 18. Meanwhile, the publicity war between BHP and PotashCorp continues unabated behind the scenes, with reports that the suitor has launched an advertising campaign to highlight that PotashCorp was anything but a true blue Canadian. According to The Australian, the campaign suggests that the current management of PotashCorp has drifted from its Saskatchewan roots, something that BHP presumably wants to address.

Ten Network Holdings

Media scion James Packer's motivations behind the $245 million share raid on Ten Network Holdings may still be subject to speculation but that hasn't stopped the chorus of pundits clamouring to applaud the audacious move, with Communications Minister Stephen Conroy the latest to pass on his praise. Conroy told ABC TV yesterday that Packer's move to re-enter the free-to-air market was a clever one and should help the "savvy operator” cover his bases given that the new anti-siphoning laws are set to drop by the end of November. The minister also reiterated that the Australian Competition and Consumer Commission (ACCC) will keep a keen eye on the competition and concentration issues likely to emerge. Meanwhile, the network's former largest shareholder Bruce Gordon has used the cover of Packer's raid to beef up his position on the register. Gordon's private investment company Birketu Private Limited has raised its stake from 11.96 per cent to 13 per cent. Packer is expected to meet Ten's boss Nick Falloon this week and the Australian Financial Review reports that he is expected to seek two board seats and demand a strategic redirection.

Hochtief, ACS

Leighton Holdings' German parent Hochtief is casting the net far and wide when it comes to fending off its Spanish suitor ACS, with reports that its CEO Herbert Luetkestrakoetter has lobbied for support against the bid from Qatar. According to German magazine Der Spiegel, Hochtief has held talks with Qatar's sovereign wealth fund, Qatari Investment Authority, with regards to the Qatari's taking a blocking stake in the German construction giant.

Wrapping up

While Kohlberg Kravis Roberts' (KKR) $1.5 billion bid for wealth manager Perpetual is the latest talk of the town on the financial services front, it looks like AMP and AXA SA are yet to see eye to eye on an equitable price for AXA Asia Pacific (AXA APH). AMP's last offer of $5.46 a share is unlikely to gets pulses racing at AXA SA and the AFR suggests that the suitor will need to either offer more cash or possibly use its Asian businesses as a bargaining chip to enhance its bid. With a few options to ponder the parties may need to get a move on given the feeling in the market that if a transaction doesn't take shape by the end of this year, it might not happen at all. Elsewhere, Telstra Corporation's woeful week has prompted the paper to speculate that the resurgent private equity operators in the local market could turn their attention to the telco. KKR, TPG and The Carlyle Group have all been in the headlines of-late and one theory sees on them offering to buy the Future Fund's remaining 10 per cent stake in Telstra. However, the sheer size of the telco and regulatory restriction should make any play quite difficult. In the banking sector, ANZ Banking Group boss Mike Smith has told the media that a decision on the $4.5 billion deal to buy a majority stake in Korea Exchange Bank (KEB) was on its way. Smith also played down talk that the departure of KEB chairman Richard Wacker was in any way related to ANZ's due diligence. In the mining sector, Xstrata's $428 million bid for Sphere Minerals has hit a substantial roadblock with Singapore's Sin-Tang Developments rasing its stake in the target over 10 per cent. Sin-tang, advised by Argonaut Securities, has so far failed to put forward a rival bid for Sphere, but The Australian suggests that an offer involving project finance in exchange for equity is on the cards. Meanwhile, coal miner and takeover target Northern Energy's shareholders have been warned by New Hope's chairman Robert Millner to not lose out on the "certain value” offered by the suitor. Millner warned that Northern Energy's prospective projects could wither on the vine without the necessary financial support. In overseas news, American International Group's IPO of its Asian life insurance arm, AIA, is on track to becoming one of the biggest global listing in recent times with the move raising $US17.9 billion with pricing at the top of its range.