BREAKFAST DEALS: Carving up News

News Corp confirms the company will split, while Hanlong's takeover bid for Sundance continues to drag on.

Rupert Murdoch will continue to chair both wings of his empire in the event of a split and Chase Carey is number two in the all important entertainment arm. But who will head up publishing? Meanwhile, Metcash had a handful of deals yesterday, including a capital raising. It’ll be interesting to await the share price reaction. Elsewhere, Freehills has done an international merger deal and done it properly, while Sundance Resources shareholders will be on awaiting news from their Chinese suitor this morning with the iron ore company in a trading halt.

News Corp, Rupert Murdoch

So it’s official, Rupert Murdoch is splitting News Corp up.

In a statement issued to the market overnight, the publishing and entertainment company said the board had signed off on a proposal to become a publishing company and an entertainment company.

Murdoch will chair both companies are well as take the chief executive role in the entertainment company, while rising star Chase Carey will maintain chief operating officer duties with the entertainment branch.

The entertainment arm will include the media company’s various cable TV interests, movie studios, while the publishing arm will get the newspapers as well as book publishing, education and integrated marketing services.

It’s been recently suggested in The Australian that the strategy outlined by News Limited chief executive Kim Williams, including the proposed acquisition of a larger stake in Foxtel via Consolidated Media Holdings, would be relatively unaffected. The idea is that Foxtel holdings wouldn’t be structurally separate from News Limited.

There was nothing in the statement from News Corp that appeared to confirm or deny this. Although Murdoch himself said "there is much work to be done,” with a shareholder meeting to decide the matter not planned until the first half of 2013.

One of the things that the company needs to work on is who will oversee the publishing business. The statement left that question open, saying merely that work would be done to assemble management and boards for both companies.

Metcash, Mitre 10, Automotive Brands Group

From almost every angle of the full year results from Metcash yesterday was deals angle.

The profit was in line with guidance, but missed market expectations. We couldn’t get a share price reaction because the grocery company went into a trading halt to raise capital.

Metcash’s balance sheet is rather conservatively poised, particularly compared to the other companies that have raised capital recently, or the ones that are thought to be in line for it.

But Metcash is raising $375 million at $3.46 a share, $50 million of which will come from retail shareholders, which is a 7.5 per cent discount to the last trading price. This is much skinnier than the previous capital raisings, reflecting Metcash’s comparatively strong position.

Metcash has a few things to pay for, according to its statement. The 49.9 per cent stake in Mitre 10 has had $67 million set aside for it, which the market was expecting.

What surprised some onlookers was the announcement that it’s acquired Automotive Brands Group, which covers the Autobarn and Autopro brands for $72 million. Another $90 million has been set aside for bolt-on acquisition opportunities. The rest was set aside for growth capex and other corporate purposes.

Metcash’s profit was down a rather unfavourable 63 per cent, largely because of the restructuring costs associated with its acquisition of Franklins.

Freehills, Herbert Smith

Freehills has become the latest Australian legal firm to book a merger based at least in part on Australia’s proximity to Asia.

Freehills will now be combined with the UK’s Herbert Smith to become Herbert Smith Freehills, a firm that will boast 2,800 lawyers across 20 offices.

Herbert Smith is known primarily for its litigation expertise, while Freehills is sought-after for its proximity to the energy and mining industry.

Herbert Smiths is the UK’s eighth largest firm by revenue and becomes one of several, the latest being Linklaters, to seek a union with an Australian firm.

However this relationship will run deeper than some other recently signed deals because Herbert Smith Freehills will have a single profit pool. Other agreements have been based on sharing clients and so forth. This is the full cheeseburger.

Sundance Resources, China Sichuan Hanlong Mining

African iron ore aspirant Sundance Resources is expected to inform the market on the progress at suitor China Sichuan Hanlong Mining, which is looking to get the deal approved.

At stake is a $1.4 billion takeover proposal from Hanlong, at 57 cents a share, that the market has consistently rated as improbable.

The Australian Financial Review believes that the deadline for securing approval from China’s National Development and Reform Commission could be extended by up to four weeks.

The newspaper suggests that this mightn’t be such a bad thing, adding that it’s understood that Hanlong could find support from a Chinese steelmaker.

Sundance is convinced that the China Development Bank is ready to sign off on the financing side of things once the regulator in question gives the tick of approval.

This has been a long slog for Sundance and the market has never really rated its chances. Given the tragedy’s that have befallen the company in recent times, Breakfast Deals wishes them all the best.

Wrap up

Yancoal Australia made its debut on the ASX yesterday, after the Chinese owned company merger with Australia’s Gloucester Coal. The $1.52 billion debut is the biggest of the year.

It’ll be interesting to watch how Yancoal trades in coming weeks, given the recent weakness we’ve seen in coal prices that’s helped Nathan Tinkler into a position where he might be able to take Whitehaven Coal private.

The Australian Competition and Consumer Commission (ACCC) has perhaps begun its new antagonist relationship with the supermarkets under chairman Rod Sims.

The competition watchdog has objected to the acquisition of five takeaway bottle shops in NSW by Australian Leisure and Hospitality Group (ALH), due to its conclusion that it would lessen competition.

It mightn’t sound like a big deal, but the ACCC has made increasingly aggressive signals towards the big supermarkets and ALH is 75 per cent owned by Woolworths.

Elsewhere, Pacific Equity Partners is calling for indicative offers for Link Market Services, a $1 billion-plus share registry business, as of next week.

ASX Ltd is the most obvious buyer, with the newspaper suggesting that Kohlberg Kravis Roberts and Bain Capital could also be in the mix.

And finally, packaging giant Amcor has picked up Wayne Richardson Sales, one of Australia’s largest independent packaging distributors, for $50 million.

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