BREAKFAST DEALS: BHP rethink

Send your tips to deals@businessspectator.com.au and don't forget to watch Deals TV for new rumours and reports later on this morning. Plus, you can follow us at www.twitter.com/WheelsDeals

BHP Billiton now says it will hold on to a majority stake in the Maruwai coal project in Indonesia. But why?

BHP Billiton, Rio Tinto, Vale

BHP Billiton says it now expects to hold on to a majority stake in the Maruwai coal project in Indonesia, prompting speculation it failed to receive an attractive offer for the project or holds a more optimistic outlook for coal. Six months after announcing it would not proceed with the first stage of the project because it didn't complement the company's long-term investment plans, BHP now says it expects to sell just 20 or 25 per cent of the project, which is believed to be worth more than half a billion dollars. According to Reuters, the project has attracted interest from local coal miners Bumi Resources and Indika Energy, although Indonesian reports say Adaro Energy is the likely acquirer. Meanwhile, despite Merrill Lynch warnings of a $US5 billion annual slice into BHP and Rio Tinto's earnings through the introduction of a resource rent tax, brokerages are tipping record results and solid share price rises for the mining giants this year as the global economy and commodity prices strengthen. According to figures compiled by Bloomberg, analysts expect Rio Tinto's net income to rise to $US9.5 billion in 2010, well above the 2006 record of $US7.4 billion, while BHP's profit is expected to come in at $US16 billion for FY2011, well above the 2008 record of $US15.4 billion. The pair will release earnings in early February. And while BHP is said to be keeping its eye on Canadian potash assets, cashed-up Brazilian iron ore and nickel giant Vale has made a big step into the fertiliser market, paying $US3.8 billion in cash for the fertiliser assets of Bunge.

Lend Lease

Over to property development, and Lend Lease has poured cold water on Moody's Investors Service suggestions it undertake a share sale to guard its credit rating and help fund recently announced projects and the privatisation of Lend Lease Primelife. Lend Lease, said by the Sydney Morning Herald to be looking at a $500 million raising, has cited its $1 billion in cash and undrawn bank facilities and readiness to undertake asset sales. But Moody's senior analyst Clement Chong says an equity raising is favourable, adding that asset sales are uncertain given bank lending is not yet at full strength. Lend Lease is on negative credit watch by Moody's and Standard & Poor's, with Deutsche Bank tipping gearing will rise to 15 per cent from a current 2.9 per cent as recent multi-billion-dollar developments work through.

CSR, Bright Foods

Time will tell whether CSR is doing the right thing by focusing on its demerger plan for its sugar and renewable energy business rather than entertain another overture from China's Bright Food Group. While CSR says Bright Foods has failed to provide a sufficiently high degree of certainty as to value, timing and likelihood of completion, and RBS points to likely interest from Cargill and Bunge, others warn that should Bright Food walk away, a more attractive offer for the business might not emerge. At $1.5 billion in cash, the offer is higher than analyst valuations of the business, and according to The Australian, the companies have different views on whether Bright Food was granted access to CSR's dataroom after the pair signed a confidentiality agreement in August. The Bright Food team argues that it might deliver a firm offer before a demerger meeting, the paper reports, with successful due diligence possibly leading to a sweetened offer price.

Financials

More senior management changes are expected at Bendigo & Adelaide Bank, according to the Herald Sun, following news its head of retail banking Jamie McPhee is set to lead the industry super-owned and one-time merger possibility, Members Equity Bank. McPhee, who has worked at Bendigo for more than two decades, was at one point tipped to head the regional lender. This follows the appointment of former Commonwealth Bank of Australia and National Australia Bank employee Stuart Grimshaw as non-executive director at Suncorp Metway, and movements in investment banking, with Macquarie Capital nabbing boutique firm Gresham Partners' long-serving Perth-based head Michael Ashforth. Elsewhere in financials, and UK reports suggest Virgin Money is talking with Sir Brian Pitman about the former Lloyds chairman taking over as chairman of the aggressive company, which has just received a banking licence in time for a swathe of asset sales, including Northern Rock and those of Royal Bank of Scotland.

Wrapping up

Auckland International Airport is undertaking a discounted share sale to help pay for its recent stake in North Queensland Airports, the owner of Cairns and Mackay airports, looking to raise $NZ126.4 million in a 1-for-16 offer. Major investors Manukau City Council and Auckland City Council will participate. Elsewhere, TZ shareholders face the unenviable choice of administration or the sale of one-third of the company to a New York-based hedge fund. A proposed debt-for-equity swap could leave QVT as a 38 per cent shareholder in the fastening technology company, which is chaired by Wizard Home Loans founder Mark Bouris. The alternative, says Longergan Edwards, is administration on the back of a $32 million debt burden. And following the announcement of Bilfinger Berger Australia's float, rather than a trade sale – and rumours of Macquarie and Goldman Sachs JBWere getting a slice of the pie – the Sydney Morning Herald says the decision by private equity firm Archer Capital to defer its Rebel Float could boost the exit price by $200 million.

And coming up on Deals TV, we'll be looking at Resourcehouse, IPOs and much more.