BREAKFAST DEALS: Aviation onslaught

Singapore Airlines' sale of Virgin Atlantic appears a boon for Virgin Australia, while construction and property investment springs to life.

It’s simply a huge morning for Australian aviation. A Virgin Australia partner is flush with cash, Qantas Airways boss Alan Joyce has another Asian strategy in mind and airport assets are changing hands. Lend Lease and Goodman Group are proving there’s some life in the construction and property investment industries. Macmahon Holdings and Leighton Holdings could be close to a deal that makes sense for them both, at least according to some. And finally, the gold sector is continuing to attract attention as we head into 2013.

Delta Air Lines, Singapore Airlines, Virgin Atlantic, Qantas Airways, Australian Infrastructure Fund

Singapore Airlines underlined the reality in global aviation that region trumps brand by selling its 49 per cent stake in Virgin Atlantic to US giant Delta Air Lines for $US360 million ($343.3 million).

The question now is how Singapore, which is majority owned by Singaporean sovereign wealth fund Temasek, will use those funds. There’s been speculation that Singapore Airlines might put some of that money into Virgin Australia.

The Virgin Atlantic sale comes just six weeks after Singapore Airlines bought into Virgin Australia with a 10 per cent stake for $105 million.

"Singapore Airlines fully supports the ongoing transformation at Virgin Australia, which has already resulted in a more competitive Australian aviation market,” Singapore Airlines boss Goh Choon Phong said at the time.

Virgin Australia’s domestic rival, Qantas Airways, reportedly tried to break the alliance between the two airlines by approaching Temasek directly, before opting for its 10-year alliance proposal with Middle Eastern giant Emirates. Qantas denied this report.

There are just eight days left until the consumer watchdog releases its draft decision on the Emirates deal.

It won’t be a final decision, but the Australian Competition and Consumer Commission will set a general line of its thinking that will be difficult to sway.

As we all know, Qantas is widely understood to be under siege from a group of activist investors that aren’t convinced by chief executive Alan Joyce’s Emirates strategy, preferring a greater emphasis on Asia and a float/sale of the Frequent Flyer business and Jetstar brand.

The Australian Financial Review understands that Joyce is pushing his Asian plan B, which will re-time flights to Asia and increase seat capacity to Singapore and Hong Kong.

While we’re talking aviation, shareholders in Australian Infrastructure Fund will receive the information memorandum for the $2 billion Future Fund deal today.

The fund is pitching for stakes in the airports of Perth, Melbourne, Launceston, minor airports in Queensland and the Northern Territory and Statewide Roads. There’s also a 40 per cent stake in Hochtief Airport Capital, which owns stakes in a number of European runways as well as a small share of Sydney airport.

Lend Lease

Lend Lease shares jumped 2 per cent yesterday, against a mildly positive benchmark index, on the news that the construction giant had booked $2.5 billion of work in a single day.

While the construction industry is facing another tough year in 2013, Lend Lease has won the rights to develop a $1 billion convention centre at Sydney’s Darling Harbour.

A Lend Lease and Desalination Sydney consortium will also design, finance, construct, maintain and operate a $1.5 billion residential apartment, hotel and student accommodation centre that will sit alongside the convention centre.

Much of the attention is centering on the fact that Lend Lease has secured work at the end of a year that’s seen a lot of smaller construction companies fall over thanks to a dried up pipeline.

But it’s also encouraging to see that this work is coming from New South Wales, a state that’s been in the economic doldrums for far too long.

The Lend Lease consortium is taking financial advice from Capella Capital, with venue management company AEG Ogden and cleaning company Spotless Group, now owned by Pacific Equity Partners, also picking up some work.

Goodman Group

The appetite for Australian industrial property exposure appears to be lifting if the experience at Goodman Group is anything to go by.

The ASX-listed industrial property company announced yesterday that it has raised a total of $624 million for its unlisted Goodman Australian Industrial Fund, extending the life of the fund to 2019 from 2015. Goodman should emerge from the raising with a 39 per cent stake.

This comes about two-and-a-half months after Goodman said it would tap investors for $400 million. The extension has been supported by most of its shareholders, the company said in a statement.

"A number of investors are continuing their due diligence and are expected to complete their process in time for a second close in early 2013,” said Goodman.

Goodman has also received some attention for its Goodman China Logistics fund, which takes advantage of the growing need for logistics facilities in the emerging economic powerhouse.

The fund was doubled in value to $US1 billion from $US500 million in August, thanks largely to a hefty commitment from the Canadian Pension Plan Investment Board.

Interestingly, The Australian Financial Review understands that some investment banks have been looking around for institutional investors about a possible block trade in Goodman. Apparently it’s worth $500 million and related to China’s sovereign wealth fund CIC, which owns almost 18 per cent of Goodman.

Macmahon Holdings, Leighton Holdings

Depending on which report you read about the prospect of Leighton Holdings purchasing the construction arm of Macmahon Holdings, analysts are either divided or welcoming of the move. Average that out and you’ve got a cautious endorsement.

Macmahon is still in a trading halt ahead of a "possible equity raising and strategic update”.

The Australian Financial Review carries comments this morning from Commonwealth Bank analyst Ben Brownette, who points out that the Macmahon construction business generated almost $1 billion in revenue in 2012.

The Australian has found analysts to be a little more cautious, with the newspaper quoting JPMorgan’s Anthony Passe-De Silva who believes Macmahon does not add "any expertise to Leighton either by geography, customer or sector group”.

Leighton will technically have some extra cash to throw around with the anticipated sale of its telco assets NextGen Networks, Metronode and Infoplex.

There is one striking similarity between the two moves. Macmahon appears to be getting out of construction so it can focus on mining service contracting. Leighton is getting out of telecommunications so it can focus on construction.

In times of trouble, simplify.

And while we’ve made passing reference to telecommunications, Telstra Corp is close to signing a sponsorship and digital broadcasting rights agreement with the Australian Rugby League Commission as early as today, according to the AFR.

Telstra already sponsors the ARL and this deal is the same number of dollars. However, Telstra is also understood to be picking up the mobile, tablet and internet broadcasting rights as well.

You might remember that question marks over this deal were raised during the Federal Court battle over the Optus TV Now services, where users recorded Australian Football League matches on a remote server and then streamed them on a slight delay. The argument went that this is the digital equivalent of a VCR.

This bypassed Telstra’s AFL exclusive rights agreement. Telstra, the AFL and NRL ultimately beat Optus in the Federal Court.

AngloGold Ashanti

Global goldminer AngloGold Ashanti deliver the market a timely reminder about its reputation among investors as a potential Australian spin-off looms in 2013.

The ASX-listed miner – which is also listed in Johannesburg, New York and London – noted in a release that Standard & Poor’s has reaffirmed its investment grade rating of BBB-, albeit with a negative outlook.

"We’ve taken strong, decisive action to maintain our investment grade rating and preserve our financial stability and flexibility,” chief executive Mark Cutifani said.

"At the same time our strategy to improve the quality and diversity of our portfolio remains firmly on track.”

The question on the lips of many Australian investors is whether Cutifani will make good on his musings last month to spin off AngloGold’s Australian assets.

Gold is front and centre of the mind of M&A watchers going into next year, with a high possibility for consolidation and listings.

Meanwhile, Macquarie analyst Mitch Ryan has nominated Alacer Gold, an ASX and Turkey-listed miner, as a particularly compelling takeover target, according to The Australian.

Wrapping up

Engineering group Clough has renewed its $200 million bond and debt facility for another three years, with the blessing of its lenders HSBC Australia, Commonwealth Bank, National Australia Bank and Export Finance and Insurance Corporation.

Meanwhile, mining services company Transfield Services has picked up $140 million worth of work between Woodside Petroleum, the Queensland Curtis LNG project, Gippsland Water and the Mackay Council in Queensland.

Elsewhere, Mariner Corporation is gunning for the chairman of its takeover target, Globe International. The $19.7 million scrip takeover offer hasn’t won the approval of the target’s board, but now a spill meeting is set for February 6, anything can happen.

Sirius Resources is planning to raise $44 million from domestic and international investors, at a 7.8 per cent discount to its previous trading price – a bargain compared to recent issues.

And finally, The Australian Financial Review reports that Woolworths might consider growing its discount department store business in New Zealand, with the country’s The Warehouse Group moving into electronics.

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