BREAKFAST DEALS: BHP quarantine

BHP sparks asset sale speculation, while CVC Asia Pacific fights to keep private equity hands on Nine.

It’s quite a feat for BHP Billiton to have gotten to the stage where if it’s not pumping tens of billions of dollars into a commodity, it’s probably poised to offload it. But that’s the conclusion that chief executive Marius Kloppers has more or less invited by saying that, while the aluminium and nickel divisions are not up for sale yet, they’ve been quarantined from investment for the meantime, with the boss adding that in 10 years' time a few divisions will definitely be gone. Meanwhile, over at Nine Entertainment, private equity owner CVC Asia Pacific has reportedly inked a deal with Goldman Sachs for almost $1 billion in debt to be converted to equity – that leaves just short of $3 billion to go. Elsewhere, firm details about how Whitehaven Coal and Aston Resources could be thrown together are starting to emerge, Maryborough Sugar Factory’s takeover from Mitr Phol is coming along well (too bad for Proserpine Sugar) and SABMiller has appointed its Foster’s Group takeover point man as its new chief executive.

BHP Billiton

BHP Billiton boss Marius Kloppers is playing it coy about when the mining giant will ultimately offload its aluminium and nickel assets. But the writing is on the wall. According to media reports, Kloppers told an audience in Melbourne yesterday that the two small – by BHP’s standards – and struggling divisions would not receive any capital investment for the foreseeable future as Kloppers concentrates on Olympic Dam, US shale gas, uranium and potash. He also said that BHP is likely to have fewer divisions in 10 years' time than it does today – one wonders which ones will be gone? Given the sheer size of BHP’s ambitions in those areas and its recent decision to offload the profitable diamond business in Canada on the basis that it didn’t fit with the "scalable” BHP mantra, the feeling is that the aluminium and nickel assets are headed the same way. If a division is not getting serious cash, it’s not long for the BHP world.

Nine Entertainment, CVC Asia Pacific, Goldman Sachs

CVC Asia Pacific’s Adrian Mackenzie is doing everything he can to make sure that Nine Entertainment stays in private equity hands to some degree. According to The Australian Financial Review, CVC has signed an agreement with Goldman Sachs that would see almost $1 billion of its $3.7 billion debt burden converted into equity. Both Goldman and CVC would be behind on their investments so it raises the prospect of Nine offloading some of its assets, which includes the well-known television station and troubled ACP Magazines division, along with Ticketek, ninemsn and Cudo.

So that’s a matter of $1 billion dollars down, almost $3 billion to go. The newspaper says CVC has abandoned its "amend and extend” proposal that was put to its lenders late last month and received an underwhelming response. Now the private equity player is trying to convince the lenders to split its debt pile into two tranches. One would be a $1.8 billion tranche that receives the highest priority, maturing in 2017, while another $900 million maturing in the same year would be paid down as CVC could afford it. We’ll have to wait and see if lenders are responsive.

Whitehaven Coal, Aston Resources

Final negotiations have transitioned to details in the discussions between Whitehaven Coal and Aston Resources, giving hope to investors that have bet Whitehaven boss Tony Haggarty and Aston’s major shareholder Nathan Tinkler can do a deal. The Australian Financial Review believes that the $4.7 billion merger is shaping up as 62 per cent Whitehaven and 38 per cent Aston mix. The paper says the key issue in Aston’s mind is that any acquisition of Tinkler’s Boardwalk Resources be conditional on the Aston bid getting up – otherwise Whitehaven could be left with the less sought-after asset while Tinkler, who owns Boardwalk, strolls off with a nice payday.

Maryborough Sugar Factory, Mitr Phil Sugar Corporation, Proserpine Sugar

Thailand’s Mitr Phil Sugar Corporation has released its bidder's statement for the $309 million, $4.45 per share, cash offer for Maryborough Sugar Factory (MSF Sugar), pledging that it will keep its operations in Australia and, wherever possible, maintain MSF management. Mitr Phol already holds 22 per cent of MSF Sugar and the 31 per cent premium on offer for shareholders has won a unanimous recommendation from the board. There’s been clear interest from Asian players in Australian sugar companies – there are few independent operators left – looking to secure supply and the target’s share price is trading at the slightest of premiums; perhaps some shareholders are looking for a rival bid. Whatever the outcome, MSF Sugar is headed elsewhere.

Grower-shareholders in the Proserpine Sugar Mill would be wondering why it couldn’t be so simple for them. With the company having slid into the hands of administrators at KordaMentha and bidder Tully Sugar, owned by China Oil and Food Corporation, making all sorts of complaints about the selling process, things haven’t gone quite as smoothly. But according to News Limited, the Queensland Supreme Court has approved the purchase of $65 million in Proserpine debt, owed to Westpac Banking Corp, by Wilmar International’s Sucrogren. That puts the recently acquired Sucrogen (from CSR) in the box seat to pick up Proserpine ahead of a crucial creditor meeting tomorrow.

Charter Hall Office REIT, Orange Capital, Luxor Capital

Charter Hall Office REIT might be destined to fall into the hands of a Macquarie-advised consortium, but not without some last-minute movements from players who have previously been a painful presence on its register. Orange Capital and Luxor Capital, which made an unsuccessful run for management against Charter Hall Group, have cancelled their shareholder cooperation agreement covering 17.25 per cent of the register so they can now wield their respective stakes as they wish – Orange has 7.38 per cent, while Luxor has 9.87 per cent. With Macquarie lending a hand, Singapore Investment Corporation (GIC) and Canada’s Public Pension Investment Board have a $2.49 offer per share.

Speaking of GIC, The Australian believes that the Singaporean company is negotiating a deal to buy CFS Retail Property Trust’s stake in the $1.5 billion joint-venture Myer redevelopment in Melbourne. The newspaper says it remains unclear whether GIC is going for the 33 per cent share in the first stage of the project as well as the 50 per cent stake in the second.

Foster’s Group, Treasury Wine Estates

SABMiller hasn't wasted any time replacing Foster’s Group chief executive John Pollaers with one of their own. After the $12 billion takeover went through last week, Pollaers has announced that he’ll step down on December 16 when control is officially transferred to the new owners, though he is expected to stay on as a consultant for a few months while the new boss finds his feet. That new boss is Ari Mervis, SABMiller’s Asia boss and point man for the Foster’s acquisition. Mervis will move from his current base in Hong Kong to Melbourne and start working in the Foster’s office once the paperwork is done. His responsibilities will also cover SABMiller’s Asia Pacific operations, including China, India and Vietnam.

Over at Foster’s old wine division, now Treasury Wine Estates, speculation has been lingering that a Chinese player will have a go at the company. Despite the wine glut that continues to hamper wine producers, TWE has outperformed the ASX200 by almost 20 per cent since July 1 as speculators consider the possibilities. But TWE has also copped a few downgrades from analysts recently as the price begins to exceed their valuations. Still, anything could happen.

Wrapping up

The Australian Financial Review understands that the sale of Regis Group, Australia’s second largest provider of aged-care services, has been put on ice while the owners await word from the Productivity Commission. Meanwhile, The Australian reports that receivers for National Leisure and Gaming have appointed real estate agents to offload the fallen pub operator’s 32 leasehold pubs. Jones Lang LaSalle Hotels and CBRE will do the honours. The same newspaper also says that John Gandel, billionaire behind private property firm Gandel Group, is on the hunt for acquisitions next year and the newly formed Centro Retail Trust has already caught his attention.

Meanwhile, the proposed sale of the NSW Desalination Plant will get some clarity tomorrow with the Independent Pricing and Regulatory Tribunal set to hand down the prices at which the new plant will be allowed to sell desalinated water. It would have been a little more convenient for the bidders if that information had been available before they submitted proposals, which were due on Monday.

Fairfax reports that Robust Resources has called JPMorgan to come on board as a defence advisor, while it goes about its business of getting to understand just how much its polymetallic asset on Romang Island in Indonesia is worth. No bids have been lodged yet, but the company’s management is being careful as an aggressive exploration program starts to pay off.