BREAKFAST DEALS: BHP strike

BHP is set to swoop on an African deposit, while Exxaro's African Iron position improves.

China’s strategy to secure commodity supplies through state-owned firms has proved quite successful over the last few years, with deals for minerals of all colours bedded down. The one disadvantage is that sometimes Beijing can’t move quickly enough and BHP Billiton is reportedly set to catch a ball China has dropped in the African nation of Gabon. Meanwhile, Nine Entertainment’s owner, CVC Asia Pacific, has apparently turned up its nose at an offer from hedge funds holding large chunks of the TV company’s debt to convert their holdings to equity. It appears we’re at a bit of an impasse. Elsewhere, the sales process appears to have stalled for the Asia-Australian Fitness First gym chain as British owners weigh up the interest, Fortescue Metals hasn’t given up on floating its non-core magnetite assets in Hong Kong while it looks for a strategic partner, and a key aviation executive has given his take on Qantas' hopes to get a joint venture with Malaysia Airlines off the ground.

BHP Billiton

Mining giant BHP Billiton is reportedly positioned to replace a Chinese company as rights holder of the largest iron ore deposit in the African nation of Gabon. According to Bloomberg, Gabon officials have become frustrated by the slow progress of China Machinery Engineering Group over the potential development of the Belinga iron ore deposit. The project is estimate to cost about $3.5 billion to develop. Bloomberg says BHP executives will engage with Gabon officials further at a conference next month.

African Iron, Exxaro, Cape Lambert

Speaking of African iron ore, South Africa’s Exxaro is making good headway in its quest to pick up Australian-listed African Iron, with Tony Sage’s Cape Lambert agreeing to hand over most of its 25.25 per cent stake. Exxaro now has 19.9 per cent of that stake from Cape Lambert for its 51 cents a share offer that will rise to 57 cents if acceptances reach 75 per cent. If a superior offer doesn’t come out of the woodwork, Cape Lambert will hand over the rest of its stake.

That leaves Equatorial Resources as the only real threat to Exxaro, as its 19.9 per cent stake could theoretically be passed off to another bidder. Or it could stand in the way of the offer, hoping that enough smaller shareholders follow suit and a higher price from Exxaro is delivered. But that appears unlikely at the moment and the South Africans look poised to win African Iron’s prize asset, a 92 per cent stake in the Mayoko-Lekoumou iron ore project in the Republic of the Congo. African Iron is receiving legal advice from Freehills, while Gilbert Tobin are taking on duties for Exxaro, with Investec Bank acting as financial adviser.

Nine Entertainment, CVC Asia Pacific

The battle over Nine Entertainment has been rekindled for the new year. Reuters reports that Nine’s private equity owners, CVC Asia Pacific, have been approached by those needling hedge funds, Oaktree Capital and Apollo Global Management, about a deal to convert the debt they own into equity. The report says the two firms now hold 37 per cent of the $2.7 billion in debt that matures in February 2013 and if it was converted to equity, CVC’s position would be largely wiped out.

Unsurprisingly, CVC declined to meet with the hedge funds. This means both sides have now declined to meet with each other in the knowledge that nothing can really be forced until the hedge funds seize a majority of the debt or the 2013 deadline gets much closer. CVC maintains that it doesn’t have to refinance the debt until that deadline, but given that it was the private equiteers that started the refinancing negotiations, they can hardly be surprised at the hedge fund manoeuvring.

Fitness First, BC Partners

Before we all broke for Christmas, Britain’s BC Partners was trying to shed a few kilos and fatten up its balance sheet by speaking to potential bidders for the Asia-Australian operations of gym chain Fitness First. The word was that the Brits were after up to $1 billion for the operations but that figure was looking like a bit of a stretch, even in the festive season. Now The Australian Financial Review believes that the sale process was put on hold over the break and hasn’t been restarted yet, with BC Partners expected to review the process over the next few weeks.

Fortescue Metals Group

Fortescue Metals chief executive Nev Power might be chuffed at the substantial upgrade to the North Star magnetite deposit, but he’s still keeping his options open about how to proceed with the good news. Australia’s third largest iron ore miner revealed just two days ago that it was considering taking a strategic partner for North Star. As Fortescue handed down its fourth quarter production results, Power said that the miner has received interest from a number of parties, but a float of its assets on the Hong Kong Stock Exchange remains an option, according to The Australian. Standing in the way of Fortescue is a rocky equities market, which has already scared away a number of parties wanting to tap in.

Qantas Airways, Malaysia Airlines

The chief executive of AirAsia X has given us his insight into what the sticking point might be for Qantas Airways boss Alan Joyce in his negotiations with Malaysian Airlines. Qantas wants to build a premium Asian airline with a hub in either Singapore or Kuala Lumpur, and it’s thought the latter option is its favourite. According to The Age, AirAsia X boss Azran Osman-Rani says the question will be who takes majority ownership. What lends credit to his perspective is the fact that AirAsia X is a brand of Air Asia, whose chief executive, Tony Fernandes, owns a 21 per cent stake in Malaysia Airlines.

Nexus Energy, Royal Dutch Shell, Osaka Gas

Nexus Energy has stretched the market’s patience enough already through its prolonged battle with former chief executive Richard Cottee. The Australian Financial Review reports that Nexus is poised to disappoint yet more shareholders by finally ending the prospect of a $1.3 billion condensate venture for its Crux project in the Timor Sea with a possible Chinese partner, in favour of a slower but more cost effective development deal with Royal Dutch Shell. At least one party will be happy – Crux minority partner Osaka Gas has made no secret of its preference for this kind of deal.

Commonwealth Bank of Australia

Commonwealth Bank of Australia boss Ian Narev hasn’t been in the job too long but he’s already knee-deep in interest rate speculation. CBA managed to raise $3.5 billion in the first covered bond issued in Australia, but it came at quite a cost. The bank raised the funds at 175 basis points over the swap rate, which is much higher than its favourable credit rating would normally demand. It comes after ANZ Bank and National Australia Bank raised cash in similar moves overseas, only to also find funding costs for Australian banks on the up. It leaves the big four with a little less room to move when it comes to interest rate movements.

Wrapping up

The whispers continue to swirl around Spotless Group amid its refusal to deliver due diligence to suitor Pacific Equity Partners for a bid less than $2.80 when $2.63 is up for grabs. The Australian Financial Review understands that a respected advisory group, which could rally enough to bring dissenting shareholders to between 35 and 50 per cent of the register, is making some phone calls. It’s looking like Orbis Australia & Co could pull the trigger on a meeting for a possible spill vote if nothing has happened by Friday.

In resources, former Molopo Energy managers Stephen Mitchell and David Hobday have emerged with a 5.1 per cent stake in Orion Petroleum after an explorer they started – Petrel Energy – was sold to Orion, Fairfax reports. Meanwhile, The Australian brings word from government-run Oil India that it intends to purchase up to $US20 million in shale gas assets. Engineering services provider Ausenco Limited has picked up a Canadian company of the same ilk for the bitumen and oil sands sector for $3.8 million, to be paid for by existing cash reserves.

And finally, Goodman Fielder shares surged 14 per cent yesterday to a one-month high amid renewed speculation that private equity players are circling. The Australian Financial Review touched base with a spokesperson and said there haven’t been any firm approaches yet.

* An earlier version of this column incorrectly stated that Molopo Energy had merged with Orion Petroleum.