Rio Tinto’s Sam Walsh has hosed down some of the speculation surrounding the miner’s asset sales program, particularly the diamond business. Meanwhile, Elders has a RuralCo bid, China Southern thought seriously about taking a bite out of Qantas and billionaire Kerry Stokes is reportedly thinking (just a little) about a deal with Southern Cross Media.
Rio Tinto boss Sam Walsh has moved to dampen the perception that the company is flogging assets by the shed-load in an interview with the UK's The Telegraph.
Speaking to the newspaper, Walsh tackled the speculation about Rio Tinto’s $US2 billion diamond business in the wake of reports that Kohlberg Kravis Roberts had lobbed a bid for one of its assets and Rio Tinto had hired Morgan Stanley to re-examine float options.
“This is not market day at the bazaar. I'd be quite happy to keep it,” Mr Walsh said.
That’s not even close to a denial by the way, but it is good shareholder communication. The Rio Tinto boss was running through some classic CEO-speak, all targeted at shareholders concerned about the miner’s costs and their returns.
“Costs have blown out and we need to get them back to a more sensible level,” said Walsh.
"Shareholder value. That's what drives business. That's what it's all about. They deserve returns."
As for aluminium, Rio Tinto’s biggest asset sale headache, Walsh listed off nations and regions throughout Asia and Africa that are on the path to urbanisation, adding that while they won’t necessarily take up all the slack left by China, they will take some.
“That will provide continuity for our business. The sort of things we supply – there are no substitutes. If you want to urbanise, industrialise, you need steel, you need copper, you need aluminium.”
This doesn’t mean much at all. Yes, Rio Tinto will hold on to the aluminium assets it thinks can serve the next crop of developing nation superstars, but if it had any faith in the market then Pacific Aluminium would be re-integrated into the broader business.
The simple takeaway from Walsh’s interview is that he won’t sell assets unnecessarily cheap.
And finally, Rio has sold $US3 billion ($3.1 billion) of US dollar denominated debt in a four part sale in the Land of the Free over the weekend.
Elders managing director Malcolm Jackman will hopefully have emerged from the weekend with a firm idea of what’s going to happen to his company’s rural services and automotive parts businesses.
On Friday, Elders announced that it had received “one or more final or near final” bids for the Elders Rural Services and Futuris Automotive arms.
Elders choose not to out rival RuralCo, which it has had some terse interactions with over the last six months or so. RuralCo decided to out itself later in the day with a statement of its own to the ASX.
“No agreement has been entered into and there is no certainty that a transaction will complete,” said the ASX-listed rural services provider that received approval from the consumer regulator to take the Elders business last week.
“Ruralco will update the market in accordance with its continuous disclosure obligations.”
The Australian Financial Review reports that industry sources believe the offer from RuralCo for the rural services business could be below $300 million, which would bring into question whether there will be anything left for equity investors of owners of $150 million in hybrids.
Elders is in a trading halt until Tuesday morning while negotiations take place. There’s a strong chance this trading halt will be extended into a suspension at some stage.
Qantas Airways, China Southern, Emirates
Speculation that China Southern was once interested in acquiring a stake in Qantas Airways has reportedly been confirmed.
China Southern airlines is the most aggressive of the carriers from the Red Kingdom towards expanding into the Australian market and, as we’ve seen many times in recent months, the strategic stake and alliance is an indispensable part of the modern airline’s playbook.
Fairfax Media understands that the Chinese airline made “tentative steps” towards taking a 10-15 per cent stake in Qantas earlier this year, which included a call to the lawyers.
It’s understood that the interest “waned” in mid-April when Qantas expanded its code-sharing agreement with China Eastern.
Take your mind back to mid-April and that was the time China Southern announced that it would begin throwing its flagship A380s into the air from its base in Guangzhou with a flight path to Australia.
Flights between Guangzhou and Sydney are now being planned for the second half of this year.
About a month after China Southern set its sights for Sydney, and not for Qantas’ register, the flying kangaroo got the official word from the competition regulator that its alliance with Emirates would be approved.
Now Qantas is adjusting its taxes and surcharges on tickets so that they fall in line with those of Emirates.
This means it will now no longer be significantly cheaper to redeem a return frequent flyer ticket on the Middle Eastern carrier as opposed to Qantas.
Transurban is finally closing the book on the Pocahontas Parkway 895 in rural Virginia, which it purchased in 2006 for $US611 million.
It’s been clear for some time it wasn’t going to be a happy ending for this foray, with Transurban having written down the value of the asset from $138 million to zilch about a year ago.
The underperforming asset will be handed over to its lenders.
Southern Cross Media is reportedly on the mind of Seven West Media billionaire Kerry Stokes after appearing to miss out on a merger deal with Nine Entertainment.
The Australian Financial Review believes Stokes is contemplating a deal with Southern Cross, but the newspaper emphasises that the thought is very young. We’ll just wait and see on that one.
And finally, the federal government has sold $700 million of Treasury bonds set for April 15, 2015.
The Australian Office of Financial Management said the bonds were offloaded for an average weighted yield of 2.485 per cent with an average coverage ratio of 5.36.