BREAKFAST DEALS: BHP bidders
BHP Billiton might be the most diversified of the three big iron ore houses according to CSLA, but that won't stop it getting out of the diamond industry. Canada's Harry Winston Diamond Corp is reportedly on the list of interested parties in the neighbouring Ekati mine, but a couple of financial investors are leading unexpected groups for the asset that could be worth three quarters of a billion. Meanwhile, Woolworths has launched a $500 million bond issue and given the reception that its hybrid issue got last year, we should all take notice. Speaking of bonds, Fortescue is also getting in the game with $1 billion to fund its expansion efforts. Finally, National Australia Bank is getting out of Nine Entertainment debt and Clive Palmer's media investment idea has received a very good review.
BHP Billiton, Harry Winston Diamond Corp, Kohlberg Kravis Roberts, Apollo Global Management
BHP Billiton has a bidding pool for its Ekati diamond mine in Canada that includes a few surprises. According to Bloomberg, sources indicate that Harry Winston Diamond Corp is interested, as well as groups led by Kohlberg Kravis Roberts and Apollo Global Management. Harry Winston isn't surprising at all, given that it owns 40 per cent of the nearby Diavik mine, with Rio Tinto owning the rest. However, KKR and Apollo have obviously spotted something in Ekati that many thought they wouldn't.
Given that Ekati is getting towards the end of its life, valuations for the assets have generally settled between $300 million and $500 million. However, Bloomberg indicates that the mine could be worth as much as $750 million and a deal could be sealed within the next month or so.
Woolworths
Supermarket giant Woolworths has raised $500 million in seven-year bonds at 155 basis points over the swap rate, according to The Australian. The issue could mark the second time in just a few months that Woolies has set the agenda for Australian corporates looking to raise funds. Late last year, Woolworths launched a $700 million hybrid in November and the strong response sparked a renaissance in hybrid debt. The newspaper reports that there's been an encouraging response from the market so like-minded companies should take notice.
Fortescue Metals Group
Iron ore miner Fortescue Metals Group has jumped back on the bond market train to the tune of $US1 billion in order to fund its ambitious expansion program. Fortescue wouldn't give the details of the raising, but it's last foray into the market in October last year raised $US1.5 billion for a coupon of 8.25 per cent, maturing in 2012. The raising is part of Fortescue's plan to produce 155 million tonnes of iron ore annually by the middle of 2014.
In the meantime, things have gone quiet on the Teck Resources front. Last month Royal Bank of Scotland was buying up shares in Fortescue, not enough to trigger a substantial shareholder notice, for what was reported to be Teck, Canada's largest diversified miner.
Whitehaven Coal, Aston Resources, Boardwalk Resources
Whitehaven Coal has been forced to criticise the methodology of the independent expert's report on its proposed merger with Aston Resources, specifically the part of the deal we all knew was going to be a problem. Nathan Tinker's privately held Boardwalk Resources is going to be purchased for between $393 million and $491 million, when it's worth about half that. Whitehaven responded by saying the valuation on Boardwalk is too "narrowly focused” and the data points used for comparable transactions were few.
While the independent experts at PricewaterhouseCoopers might disagree, Tinkler is a major shareholder in Aston and Whitehaven will need to keep him happy to get this deal over the line.
Nine Entertainment, CVC Asia Pacific, National Australia Bank
National Australia Bank has reportedly offloaded its debt exposure for Nine Entertainment as the private equity owner CVC Asia Pacific prepares for assets sale to address the broadcaster's $2.7 billion debt burden. According to The Australian, NAB exited its $80 million exposure to Nine, bringing the list of original lenders still staying with Nine to a small handful. The newspaper believes that the bank got 85 cents in the dollar for the sale.
This comes amid reports that the teaser sale documents for Nine's events division – Ticketek, Allphones Arena, Nine Rewards and Nine Live – have started circulating. UBS is advising the company on the proposed asset sales. The problem for CVC is it's a forced seller and everyone knows it, however it can't sell the assets for less than a certain amount of book value without having to go to lenders. Included in its lending pool are Apollo Global Management and Oaktree Capital, both of which are waiting for such a moment to refuse and force a debt-to-equity conversion.
Qube Logistics, Stockland
Stockland has sold its 55 per cent stake in the planned Moorebank freight terminal in Sydney to Qube Logistics for $123 million, a slight discount to book value. The sale frees up Stockland to buy back shares, which now has a target of 10 per cent of issued capital.
In the meantime, Qube will see its stake in the site rise from 55 per cent to between 67 per cent and 85 per cent. The remaining shareholder, QR National, has pre-emptive rights to purchase a similar sized stake for the same price and has 30 days to exercise it. The site is currently occupied by the Defence Department and earmarked for a $1 billion facility to move freight.
Optus, Huawei, Telstra
Optus has picked out Huawei to build its 4G network throughout Newcastle in NSW. The move makes Optus the third player to move into the faster mobile broadband technology, with Telstra having lent on Ericsson for its network and Vodafone trialing one as well. Meanwhile, the federal court case investigating whether Optus' mobile football streaming service constitutes a copyright infringement has begun. The outcome of the case has massive implications for Telstra's five-year, $153 million agreement with the AFL for mobile broadband broadcast of games.
Goodman Fielder, Wilmar International
Many saw Goodman Fielder as a prime takeover target and Wilmar International's acquisition of a 10.1 per cent stake simply reinforced that perception. However, Citigroup analysts suggest that there's only about a one-in-three chance that Wilmar will take the whole company. Instead, its hypothesised that Wilmar is lining up for the oil and fats business and New Zealand milling units that are up for sale at Goodman following a strategic review.
Wrapping up
Clive Palmer's suggestion of a blind trust for investment in independent journalism has won some substantial praise, unlike his ideas for the A-League. Fairfax reports that Bond University professor of journalism Mark Pearson believes the idea is "a good thing and very different from direct investment”. Pearson could be referencing the movements of Palmer's friend Gina Rinehart, who has picked up stakes in Fairfax Media and Ten Network.
Thor Mining has denied that the company is trying to find a buyer, amid some chatter in media and internet forums. However, it did remind the market that it's been speaking to a number of players about off-take agreements and financing for its Molyhil tungsten and molybdenum project. Another ASX code that's been getting some attention is GI Dynamics, the diabetes and obesity treatment group that saw just under 10 per cent of its equity change hands yesterday.
And finally, medical device company Kai Medical is reportedly looking at an IPO. According to The Australian Financial Review, JPMorgan is testing the water for a float for the company, which is worth up to $100 million.