BREAKFAST DEALS: Aviation antics

The ACCC takes centre stage as the local aviation industry undergoes a seismic shift, while Neptune Marine has a coup.

Virgin Australia just won’t let up on senior rival Qantas Airways, with a trio of deals announced yesterday that just add to the changing picture of Australian aviation competition. The ACCC is centre stage. Meanwhile, Neptune Marine Services was up in a big bad way as a Singaporean suitor emerged. Western Desert Resources wasn’t so lucky. Mining magnates Andrew 'Twiggy' Forrest and Gina Rinehart had a spell each of bad luck yesterday, while Nathan Tinkler is lashing out hard at Whitehaven Coal. And finally, there’s one less player looking for a wing at Ingham Enterprises.

Virgin Australia, Tiger Airways, Singapore Airlines, Skywest, Qantas Airways, Emirates, Flight Centre

Two things have emerged from the parcel of deals that Virgin Australia announced yesterday.

Firstly, chief executive John Borghetti is far from done in his quest to reshape the Australian aviation market and position his airline as a highly mobile, low cost competitor capable of really taking on rival Qantas Airways.

Secondly, the Australian Competition and Consumer Commission isn’t just the most crucial government agency when it comes deciding how the layout and characteristics of the broader industry and the two main players should evolve, but it will do so with both those two players moving at the same time.

As readers are no doubt aware by now, Borghetti announced yesterday that Singapore Airlines has taken a 10 per cent stake in Virgin for $105 million, while the local carrier is paying $35 million for a 60 per cent stake in troubled bare-essentials carrier Tiger Airways Australia and an in-principle agreement to buy Western Australia’s Skywest Airlines.

That last deal will see Skywest shareholders receive 0.45 cents per share, through a mixture of cash and scrip. With Skywest in company, Virgin can take the fight up to Qantas and its vehicle QantasLink in the fly-in fly-out market.

Goldman Sachs provided the advice for Virgin, while Morgan Stanley helped out Tiger and Skywest took advice from Moelis & Co.

Singapore Airline’s stake has been given the nod by the Foreign Investment Review Board, but Tiger and Skywest will still need to win the green light from the ACCC.

Consumer watchdog boss Rod Sims is already examining the proposal from Qantas to establish a 10-year alliance with Middle Eastern carrier Emirates. The stopover point for its London route will now go via Dubai, instead of Singapore, with the Frankfurt flights scrapped.

The ACCC is also dealing with the recent court case against Australia’s largest travel retailer Flight Centre. It was alleged that Flight Centre tried to get Singapore Airlines, Emirates and Malaysia Airlines to stop offering and booking flights cheaper than the ones on offer.

As explained (at great length) in this morning’s edition of The Distillery, this represents a rare opportunity for the ACCC to make its decisions while the main players have all laid out their plans.

Both airlines have, and probably will, continue to take the occasional opportunity to argue that their proposals are crucial to their survival, while their rival is seeking undue influence over the market.

Whatever the case is, the ACCC couldn’t be better placed to oversee the whole picture.

For what it’s worth, the Virgin register really liked the idea. Virgin Australia shares finished trading 5.4 per cent higher yesterday at 48.5 cents.

That’s a 70.2 per cent gain for 2012 to date.

Neptune Marine Services, MTQ Corporation

Speaking of share price movements, Perth’s oil and gas engineering group Neptune Marine Services shot up 29 per cent to 31 cents a share yesterday as major shareholder MTQ Corporation emerged with a $59.6 million takeover offer.

The Neptune board told shareholders not to take any action on the 3.2 cents a share offer until the independent chairman and the board have had a look at it.

But the 33 per cent premium to the previous trading price looks pretty attractive. That sort of premium used to be run-of-the-mill, however in leaner times bidders have the edge.

The Singapore-listed MTQ is bidding through subsidiary Blossomvale Investments (Blossomvale, what a nice name). The company already has its hand on 19 per cent of the register, which means unless the directors determine that this offer is grossly insufficient, the bidder is in a commanding position.

Western Desert Resources, Meijin Energy Group

Sticking with resources and share price movements, there weren’t any celebrations over at iron ore play Western Desert Resources. China’s Meijing Energy Group decided to withdraw its $434 million takeover bid.

WDR shares plunged 26.9 per cent to 64 cents, which is almost bang on where the stock was just a few days before Meijin popped up on September 19.

Managing director Norm Gardner said it was both "unfortunate” and "surprising that Meijing didn’t proceed.

"Only Meijin know the true reasons for their surprising and without warning decision this morning,” said Gardner.

"Given the discussions and feedback WDR has had with the parties conducting due diligence and providing support to Meijin over the last six weeks we are of the view that the decision not to proceed was not actually based upon the WDR business or its potential.”

Meijin popped up with the offer just as Fortescue Metals Group inked its refinancing deal with Credit Suisse and JPMorgan in the wake of a sudden plunge in iron ore prices through the theoretical floor offered by high-cost Chinese producers that shut down around $US110-$US120 a tonne.

Since then, however, iron ore prices have shown signs of recovery. If anything, WDM has become more attractive since the proposal was revealed.

Fortescue Metals Group, Gina Rinehart, Nathan Tinkler

While the iron ore price picture has improved since Fortescue’s mood-changing deal, founder Andrew ‘Twiggy’ Forrest hasn’t had everything go his own way.

The Australian Financial Review reports that the Western Australian government has rejected the iron ore miner’s request to defer hundreds of millions of dollars in mining royalties.

The news also comes as Australia’s richest person, Gina Rinehart, fails in her bid to prevent a competing mining dynasty from securing her multi-billion dollar stake in an undeveloped iron ore deposit.

Given the lending capacity that Rinehart needs to bed down to make the $10 billion Roy Hill project a reality, you could probably bet your bottom dollar that she’ll take the house of the late Peter Wright to the High Court after the disappointing verdict in the West Australian Court of Appeal.

Meanwhile in the coal sector, another big mining personality is throwing their weight around in a serious fashion.

Whitehaven Coal major shareholder Nathan Tinkler took out ads in The Australian Financial Review yesterday for an open letter to shareholders expressing his "frustration and disappointment” with the coal company’s performance.

The ad came as Tinkler prepared to vote against the re-election moves for some of the directors at Whitehaven’s annual general meeting tomorrow (Thursday).

It also comes amid reports that Tinkler is working to restructure his personal debts, settling legal disputes and offloading racehorses in the hope of having another crack at taking Whitehaven private.

Australia’s M&A Scoreboard

While the Australian M&A market generally remains in a subdued state against recent history, the private equity sector is racking up some more runs on the scoreboard lately.

According to the latest survey on private equity deals from Reuters Thomson, there were a total of $1.65 billion in private equity deals across Australia and New Zealand in the first nine months of this calendar year.

That’s a 22 per cent increase on the same period in 2011, although there’s also been a 21 per cent drop in volumes.

Wrapping up

The bidding pressure for Ingham Enterprises has reportedly ebbed a little, with CP Foods pulling out of the progress.

The Australian Financial Review understands that the Goldman Sachs-advised CP withdrew its name from the Investec-run process. Apprently private equity giant Blackstone is still in the mix, along with "a Morgan Stanley advised-trade buyer,” which is thought to be China’s Hangzhou Wahaha Group Co.

Crucially, the favourite for Ingham, but also the player facing the largest competition regulation concerns, New Zealand’s Tegel Foods, did not submit and indicative proposal, the AFR confirms.

The same newspaper reports separately that an Indian consortium is planning to invest in a $250 million dairy factory in Hay, NSW, which is noted for its energy efficiency.

Returning to BlackRock for a moment, one of the giant mining investor’s leading managers has reportedly said that the company sees many opportunities in the resources sector, with the market adopting a "very pessimistic” outlook.

The Australian reports comments from World Mining Fund and World Gold Funds manager Catherine Raw, who observes some commodity consumption levels, particularly for copper, have increased ahead of expectations.

If prices are down and BlackRock sees some room to move, Australian resources targets should consider themselves on notice.

In telecommunications, Singaporean-owned telco Optus has dumped its distribution deal with TeleChoice as part of its new strategy that will see the roll out 33 of its own stores across the country.

And finally, Vodafone has won approval from New Zealand competition regulators to take over Telstra’s struggling operation TelstraClear for $NZ840 million ($A666 million).