BREAKFAST DEALS: Captive Sundance

Sundance is still in suspension as it digests Hanlong's legal pickle, while Nine reportedly fine tunes its aim at Southern Cross.

The never-ending takeover of Sundance Resources has stretched the definition of bizarre to unbelievable lengths, with the apparent arrest of the Chinese bidder’s chairman. Nine Entertainment is reportedly thinking about a Southern Cross merger that would work with the 75 per cent reach rule. Roy Hill Holdings looks to have picked its preferred construction bidder; the Brickworks-SoulPatts cross-shareholder arrangement isn’t going anywhere; and those Tom Waterhouse reports have been firmly denied.

Sundance Resources, Sichuan Hanlong Mining

It’s difficult not to say that the situation with Sundance Resources is now just funny – difficult largely because the suitor’s chairman is reportedly behind bars.

Sundance will hold emergency talks with executives from China’s Sichuan Hanlong Mining and the powerful National Development and Reform Commission about where the $1.3 billion takeover offer is at following the reported arrest of Hanlong's multimillionaire chairman Liu Han.

The Chinese-language Shanghai Securities News reports that Liu and his ex-wife are in police custody in Beijing, while his current wife and other members of his family are being held in the Sichuan province in China’s south.

No reason was given for the detainments.

Sundance’s trading halt was extended into a suspension as the company rapidly tried to get a handle on what’s going on at its suitor since July 2011.

This has been one of the most farcical takeover battles in recent memory, with the offer price cut from 57 cents falling to 45 cents after the iron ore price started showing signs of weakness. Its shares last traded at 21 cents.

A continual inability of Hanlong to secure financing or approval from Chinese regulators has raised speculation that Beijing might be trying to muscle in on the Sundance situation, or completely push Liu out of the equation.

Sundance, for its part, has reportedly been talking to Glencore International about the commodity trader taking a stake in the Mbalam iron ore port and rail project, its primary asset that straddles the border of Republic of Congo and Cameroon.

Hanlong further frustrated Sundance by making regulatory approvals from those two countries a condition of its $1.3 billion bid.

Sundance went and got ‘em, but we still don’t have a deal.

Southern Cross Media, Nine Entertainment, Ten Network

Nine Entertainment is believed to be considering a merger proposal for Southern Cross Media that would sidestep the 75 per cent reach rule, according to Fairfax Media.

Nine boss David Gyngell is thought to be speaking to investment bankers at UBS to see if a $4 billion deal to merge the metropolitan broadcaster with its regional counterpart can be done.

If such a deal were to get up, Nine and Southern Cross would have to divest some of their licences.

The report appears to indicate that this is what Nine and its investment bank are thinking, though talks about the idea with Southern Cross itself haven't happened yet. It’s impossible to believe that the idea wouldn’t have at least been noted during recent talks when the reach rule looked like it was gone.

Regardless, Southern Cross chairman Max Moore-Wilton says new Ten Network chief executive Hamish McLennan, Southern Cross’ regional affiliate, is being “increasingly emotional”.

The Australian Financial Review carries the quote this morning, adding that he has never said discussions about a new affiliation agreement have stalled.

Ten has been looking increasingly vulnerable as the reach rule looked more and more like being abolished. The chances appear to be fading with the ALP in an apparent death rattle at the moment.

Meanwhile, Southern Cross’ second largest shareholder, Allan Gray, has lifted its stake in the company to 11.6 per cent from 10.6 per cent.

Allan Gray’s managing director is Simon Marais, who has been an intriguing media player of late. His fund’s shareholding in Fairfax Media, which has been a window for discussions about strategy, is of note.

Roy Hill, Hancock Prospecting

Gina Rinehart’s Roy Hill Holdings has reportedly picked Samsung C&T Corp as its preferred bidder for the multi-billion-dollar contract to build the mega iron ore project.

Reuters brings us word from two sources that say Samsung has beaten POSCO Engineering & Construction, something that chief executive Barry Fitzgerald declined to comment on. We’ll get official word next week.

Roy Hill is 70 per cent owned by Rinehart’s Hancock Prospecting; while POSCO, South Korea’s STX, Japan’s Marubeni and Taiwan’s China Steel round out the ownership group.

A construction contract is important, but the big one is the estimated $7 billion in funding that the mine, rail and port project still needs to get off the ground.

Fitzgerald says that some progress has been made on this front, with hopes that financiers will be on board by the end of the day.

Brickworks, Washington H Soul Pattinson

Activist shareholder Mark Carnegie has reportedly run into the brick wall that is the cross-shareholding arrangement between Brickworks and Washington H Soul Pattinson.

The Australian Financial Review reports that Brickworks is sending out a letter today, indicating that it will not “waste time, effort and resources” on “half-baked” unsolicited strategic proposals.

That's a reference to Carnegie and Perpetual fund manager Matt Williams. Carnegie came on board late last year when Perpetual lent a portion of its 12.6 per cent stake in Brickworks to use as an in to start putting alternative proposals to Brickworks.

Perpetual also owns 11.9 per cent of SoulPatts, which is 43 per cent owned by Brickworks and owns 45 per cent of Brickworks for itself.

This insulates the power of billionaire Robert Millner, who sits at the top of all this.

Brickworks independent director Robert Webster said the company would only mull “well considered” ideas, according to The Australian Financial Review.

“A new and well researched proposal dealing with tax and other issues will be assessed by the board,” he said.

The crucial bit of information is Webster is an independent director. One of the criticisms that Williams has levelled at Brickworks is that Millner nominates board members that are also involved in other Millner vehicles – further protecting his grip.

Webster is one of independents. If Carnegie and Williams want to split this all up they’re going to have to go hostile on them.

Wrapping up

General Electric boss Jeff Immelt told a conference hosted by The Australian that he’s on the look out for acquisitions in Australia. He wouldn’t be drawn on potential targets, unsurprisingly.

Meanwhile, the Tom Waterhouse story has been shot down in a big bad way. Media reports indicated that Britain’s Ladbrokes was interested in taking a 50 per cent stake in the Australian betting business.

“I can confirm we have had no contact with Tom Waterhouse,” said a spokesperson for Ladbrokes, according to The Wall Street Journal.

Elsewhere, NBN Co has confirmed that the Syntheo joint venture between Service Stream and Lend Lease has had the fibre rollout in the Northern Territory.

And finally, the Australian Office of Financial Management has sold $600 million of April 21, 2013 Treasury bonds at an average yield of 3.487 per cent.

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