BREAKFAST DEALS: BHP shopfront

BHP Billiton looks set to spin off coal, oil and gas interests, while Inghams Enterprises becomes private-equity owned.

BHP Billiton has ‘at least a dozen’ assets up for grabs, which doesn’t include the potential options for its Nickel West business. Inghams Enterprises won’t be listing on the ASX, but it’s still a net positive for M&A watchers. Meanwhile, Virgin Australia has more convincing to do to win Tiger Australia, the Future Fund could have another fighter in Perth and News Corporation’s publishing arm will have no debt and a warchest – now what could that mean?

BHP Billiton

Mining giant BHP Billiton isn’t wasting any time transitioning from the age of capex billions to non-core asset sales, with The Australian reporting “more than 10 assets are on the chopping block”.

The newspaper indicates that the assets include domestic coal interests and offshore oil and gas assets. The miner has confirmed that BHP Billiton chief financial officer Graham Kerr made the revelation while speaking to sell-side analysts.

While mystery remains about precisely which assets are up for sale, BHP Billiton has already nominated the Gregory-Crinum coal asset in Queensland as a potential divestment target. Presumably, this is one of the 10 or so.

That’s leaving aside the potential for a $3.9 billion nickel spin-off. Speculation for such a move kicked off two weeks ago when BHP Billiton announced a high-grade discovery in Western Australia, which could make the Nickel West business, beaten down recently by prices and the Australian dollar, a much more attractive proposition.

The bottom line is 2013 is a year of deals for BHP.

Inghams Enterprises

One in every three chickens in Australia will now come from private equity, following the $850 million sale of Inghams Enterprises to TPG Capital.

The size of the deal is well short of the $1.6 billion price tag that the Ingham family initially hoped for, but that’s to some extent because the family has held on to not just the horse racing business, but the Inghams land holdings as well.

TPG beat out rivals Blackstone and Chinese giant New Hope in no small part because the private equity firm promised to stick with current management.

“An important part of the decision for me was finding a buyer who would ensure that our customers will continue to receive the highest level of service and our employees would be well looked after,” founder Bob Ingham said in a statement.

While this means Inghams is off the list of potential IPO candidates for 2012, having instructed advisers to investigate the possibility after initial offers disappointed, it does give private equity companies some reason to hope that good businesses can still be picked up in Australia for the moment.

The stock market is surging, which means that some previous buyout targets have become more expensive for opportunistic private equity bidders.

The Inghams deal not only demonstrates that big deals can be done with unlisted companies, but simply that big deals can be done. No small feat for a market that’s been in the toilet for so long.

Of course, one of the more recent notable deals with private equity was the $724 million purchase of Spotless Group, which was in fact listed, by Pacific Equity Partners.

Spotless was bogged down but its Braiform clothes hanger business and it was widely expected that PEP would buy the lot, cut costs and sell off Braiform at some stage.

Well, according to Deal Journal Australia, two sources indicate that PEP has received “several bids” for its clothes hanger business.

Virgin Australia, Qantas Airways

Virgin Australia chief executive John Borghetti has been asked by the consumer watchdog for more information about the proposed acquisition of a 60 per cent stake in Tiger Australia.

The low-cost airline told the market on Friday that the Australian Competition and Consumer Commission, which was due to hand down its findings this Thursday, wants some more details. It wasn’t revealed what those details are.

We also don’t know yet when the next decision date will be.

Tiger Australia is a basket case. It has a terrible reputation for customer service beyond what you'd expect of the lowest-cost operator, but at the same time it's posting massive losses.

Virgin is using the ‘failing force’ argument to encourage the ACCC to let the Australian airline industry return to a duopoly. In other words, ‘Let us take Tiger Australia before owner Singapore Airlines pulls up stumps’.

But Borghetti has recently eased up on the capacity aims for Tiger.

Meanwhile, rival Qantas has defended its internal processes after selling three of its jumbos to a company that funnelled the jets into Iran. Whoops!

Future Fund, Australian Infrastructure Group, AustralianSuper

AustralianSuper could reportedly be joined by another minority shareholder in Perth Airport for legal action against the Future Fund.

The Australian Financial Review understands that not one of the minority shareholders in the Perth airport decided to exercise its pre-emptive rights over the stake the Fund is after through its $2 billion deal with Australian Infrastructure Fund.

While AustralianSuper hasn’t made good on its threats to sue the Fund over its alleged practise of ‘gaming,’ where assets in an overall bid are valued to diminish pre-emptive rights, the AFR understands it hasn’t given up the idea and another shareholder could jump in.

The other Perth Airport investors are Commonwealth Bank Group Super, The Infrastructure Fund, Perth Airport Property Fund, SunSuper and Utilities Trust of Australia.

News Corporation

Media baron Rupert Murdoch has made sure that his beloved printing business will be given a fighting chance when it splits from News Corporation’s entertainment assets, as expected.

News Corporation is the title that will be maintained by the publishing arm, which includes News Limited, the owner of this website, along with the Australian pay TV assets. The rest of the entertainment arm will become its own division.

Murdoch plans to leave the publishing business with no debt and a $US2.6 billion ($2.5 billion) warchest, which gives it enormous potential for investment inside and outside the business.

Bottom line, Murdoch has left himself the flexibility to continue his penchant for buying newspapers. Would we have expected anything else?

Wrapping up

The Australian Financial Review reveals this morning that, apparently, Ten Network is no longer clearly in favour of axing the reach rule.

The newspaper reports that a meeting of the Free TV board last week left members representing the other networks confused about whether Ten still supported getting rid of the rule, sources say there were signs in either direction. The pertinent legislation is imminent.

Of course, the obvious conclusion is that Ten is nervous that regional affiliate Southern Cross media is talking to Nine about a potential merger. Wowsers!

The battle for hearts and minds of shale gas, which has already run a lot of its course in the US, is beginning in Australia.

Beach Energy managing director Reg Nelson appeared on the ABC’s Inside Business yesterday defending the merits of shale technology after doing a $349 million deal with energy giant Chevron last week.

The Australian shale gas industry is in its infancy and discussions like this will prove crucial as BHP Billiton looks to move into the local sector. No doubt more big players will follow.

Speaking of the miners, coal baron Nathan Tinkler will have to front up to court this week after a delay to his hearings for Mulsanne Resources last week.

Of course the issue on everyone’s minds is what at long last will happen to his Whitehaven Coal stake.

Whitehaven has just done a deal with Japan’s Itochu to win the company’s 29 per cent stake in the ASX-listed miner’s Vickery South project, which is near Whitehaven’s Vickery Project.

The deal gives Whitehaven control of the asset in exchange for 11.47 million shares going to Itochu. It’s roughly a $30 million deal.

And Woodside Petroleum boss Peter Coleman has played down suggestions that the oil and gas company’s Israel project is in trouble because of potential regulatory hurdles with its joint venture partners reported last week.

Meanwhile, Leighton Contractors has picked up $120 million worth of work for a big extension for the third train rail between Epping and Thornleigh in Sydney. It’s to give freight trains, which have to share infrastructure with much faster moving vote-carrying commuter trains, greater use of the line.

And finally, with the weather so diabolically hot, we’ll finish with the great outdoors. The Australian Financial Review reports that the largest operator of Australian caravan parks, Discovery Parks, is looking for an investment bank to examine strategic possibilities.

The newspaper believes the business could be worth up to $400 million.