BREAKFAST DEALS: Billabong saviour

A US major appears to have stepped up with an offer for Billabong, while Westfield frees up some cash.

While rough waves make the global economy a dangerous place for some to swim, private equity is using the surf to its advantage. First Pacific Brands fell amid cautious consumer sentiment and a high Australian dollar, now Billabong International has reportedly received an approach from US private equity player TPG Capital. Meanwhile, Westfield Group has really impressed the market with its Canadian pension fund joint venture and asset sales. Elsewhere, Macquarie Group is said to be sniffing at another purchase (a big one), African Iron looks set to fall to South Africa’s Exxaro at a better price, OZ Minerals is reassuringly looking for big buys in 2012 and Foxtel is responding to the consumer watchdog’s Austar concerns.

Billabong International, TPG Capital

It appears the theory that Billabong International was a primary takeover target for private equity, given the interest in Pacific Brands, wasn’t just idle speculation. The Australian Financial Review reports that the embattled clothing company has received a $766 million takeover bid, understood to be at least $3 a share, from US major TPG Capital.

Expect quite a reaction to the share price because that’s a 68 per cent premium to Billabong’s last trading price of $1.79. The company has been battling decreasing hold over its young consumer base, a faltering distribution strategy and an untimely rise of the Australian dollar.

Westfield Group, Canada Pension Plan Investment Board

The Lowy family set the market alight yesterday by announcing a few deals that injected some much-needed energy into a stock that has really struggled since the global financial crisis.

First up, the world shopping centre giant is forming a $US4.8 billion joint venture with Canada Pension Plan Investment Board. The Canadians will become a 45 per cent owner in a portfolio of 12 US properties, thus unlocking billions that Westfield can channel into other areas where strong growth is on offer. Second the company says it has offloaded its interest in three shopping centres in the UK for $240 million, demonstrating its diminished emphasis on areas where growth isn’t on offer. And finally the company announced a share buyback program of up to 10 per cent of its register. All in all this triple-pronged attack worked well, with the share price rising over five per cent, the largest bump in two and a half years.

Macquarie Group, Dexia Asset Management

The silver donut looks to be stirring. Macquarie Group is reportedly considering a run at Dexia Asset Management, parent of the well-regarded Ausbil Dexis funds manager. According the The Australian Financial Review, Macquarie is in discussions with Dexia and the prize is $120 billion in funds under management that would go with Macquarie’s $300 billion-plus. It’s not known, however, what stage the discussions are at yet.

African Iron, Exxaro

South Africa’s Exxaro is getting ever closer to giving many African Iron shareholders what they want – a better deal for the target’s shares. A notice to the Australian Securities Exchange indicated that Exxaro’s stake in African Iron had risen to 66.59 per cent from 44.75 per cent. That means shareholders are staring at 51 cents a share from the suitor, but there’s a carrot they will no doubt hope to get their hands on. Exxaro has declared the offer unconditional and the payment will increase to 57 cents a share if acceptances pass 75 per cent. The increased offer expires on February 28.

The only major impediment to that is Equatorial Resources. While it doesn’t hold a blocking stake, its 19.9 per cent share could be enough to cause headaches if there’s another equally unmoved shareholder out there with enough to push them towards that crucial 25 per cent market. But there’s little word that anyone out there is turning their noses up at 57 cents a share.

OZ Minerals

OZ Minerals chief executive Terry Burgess isn’t unmoved by calls for him to deploy the miner’s war chest, particularly with doubts that the Carrapateena copper-gold mine will be ready in time to take over when the company’s flagship Prominent Hill project becomes uneconomic. Burgess said a big purchase was definitely a high "main focus” in 2012 after handing down a set of results that analysts described as "solid”.

Many are pointing to OZ’s failure to pick up Sandfire Resources, in which it holds a 19 per cent stake, when it had the chance. Sandfire shares have soured 50 per cent in the last 12 months. But Burgess would have one eye on history. It’s easy to forget that excessive debt forced OZ to offload a number of assets in mid-2009 to China’s Minmetals. Deploying the cash to ensure production is a good reason, but you have to have a target you’re confident in.

Foxtel, Austar United Communications

New Foxtel chief executive Richard Freudenstein mightn’t have the unfortunate beginning to his job that some might have been expecting. When Freudenstein took control following the departure of Kim Williams to News Limited, Foxtel’s $2 billion merger with regional pay-TV company Austar United Communications was looking shaky thanks to the time the Australian Competition and Consumer Commission was taking to assess it. It should also be pointed out that the ACCC said that they’d received such an enormous amount of documents that it was taking a long time just sifting through them.

But the point is, things weren’t looking good. However, The Australian Financial Review understands that Foxtel is on the brink of submitting undertakings addressing concerns put forward by Malaysian-backed FetchTV, which has been flogging internet TV to Australian telcos. It remains to be seen whether the consumer regulator will be persuaded by the documents, but the chances of a green light appear to be improving.

Wrapping up

Petsec Energy has agreed to earn a 24.5 per cent working interest in shale oil leases for 24.5 square kilometres of Alberta’s Western Canadian Sedimentary Basin. It’s a hot spot: about 90 per cent of the oil and gas from Canada comes from this area. Speaking of shale products, Royal Bank of Scotland analyst Lyndon Fagan has given BHP Billiton an almighty whack by mentioning its acquisition of US shale gas company Petrohawk in the same sentence as Rio Tinto’s disastrous purchase of Alcan.

Speaking of mining giants, Xstrata has signed up Macquarie Capital for some advice on its sale of a stake in the Wandoan project in Queensland. The Swiss-based player, which is currently in the middle of a merger with major shareholder Glencore International, is close to signing off on the $6 billion project. And finally, the consequences of being embroiled in bribery allegations are quickly becoming clear to Leighton Holdings. The construction company could be effectively locked out of future contracts in Iraq if its subsidiary Leighton Offshore is found to have made illegal payments to secure deals, senior government resources figure Sabah Al-Saidi has told The Australian Financial Review.

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