BREAKFAST DEALS: Casino standoff
James Packer faces a new hurdle his Sydney casino license bid, while Rio Tinto receives an offer for its aluminium plants.
Crown, Echo Entertainment
Echo Entertainment chairman John Story has turned up the heat in a simmering battle with rival casino operator and stakeholder Crown, amid increased speculation that James Packer's company is considering a full takeover. In a clearly defensive move, Story has penned a letter to shareholders talking up the value of the company's exclusive casino license in NSW, and also reaffirming that it will not be offering a board seat to Crown, which spent more than $250 million lifting its stake in Echo to 10 per cent last month.
Current thinking goes that if the relationship continues to sour and Packer is left without a say in the boardroom, he may be tempted to buy the company outright. To do that, he would need to raise plenty of capital, and he probably wouldn't be too keen on diluting his 46 per cent stake in Crown. That could bring his other assets into play. Consolidated Media, anyone?
Rio Tinto, Ivanhoe Mines
Fresh from announcing that it is reviewing its diamond business, there are more M&A rumblings at Rio Tinto – the miner has received a binding offer from private equity group HIG for three French alumina plants, according to Reuters. While there's no figure attached to the announcement, we do know it is part of the miner's long-running program to offload about $8 billion worth of aluminium assets.
Earlier, Rio's chief financial officer Guy Elliott said the company was seeing "quite a lot of interest" in those aluminium businesses, mostly from trade buyers, but noted that it was keeping its options open. That could includes a partial sale or an initial public offering. Elliott also raised the possibility of selling off parts of Ivanhoe Mines, which it recently took control of. It will certainly want to keep the Oyu Tolgoi copper-gold project in Mongolia, but non-core assets, including its stake in coal miner SouthGobi or Ivanhoe Australia, may be easier to part with.
Deal watchers may have been disappointed when Brambles extended the deadline for the sale of its document-management business, Recall, but it might not take the full four to eight weeks stated by the company. Brambles' "advanced discussions" are apparently becoming quite intimate.
The Australian Financial Review reports that the field, once said to have included Carlyle Group and Apollo Global Management, has thinned to just one – probably a tie-up between US–based Cintas Corporation and Canadian private equity firm Onex. But less competition could mean less value, with analysts doubting that chief executive Tom Goreman will be able to extract the $US2 billion he's after. He's said time and again that he won't be forced into a fire sale, but we'll have to wait to see how he behaves when final offers are on the table.
Brambles is being advised by UBS and Merrill Lynch.
There's renewed talk of a Goodman Fielder takeover after a big spike in the number of Goodman shares changing hands in recent days, according to The Australian Financial Review. The focus is currently on Singapore-based commodities trader Wilmar International, which has already lifted its stake in Goodman to 10.1 per cent.
Wilmar has already demonstrated a strong interest in Australia, also buying Sucrogen, the sugar division of CSR, for $1.75 billion about a year ago. Given that Goodman's market cap currently sits around $1.4 billion, Wilmar might need to raise the same amount again if it wants to comfortably take control of the company – especially given suggestions that several private equity groups have also made unsolicited approaches.
Qantas Airways, Air Pacific
Qantas Airways has made no secret of its desire to exit its investment in Air Pacific, but the flying kangaroo might have new reason to jet after the Fijian government there moves to take greater control of its local carrier. A surprise new law there stipulates that Air Pacific must be "under actual and effective control of Fijian citizens" and will probably require Qantas to cut the number of directors it can appoint to the board from four to three, according to The Australian.
The Fijian government denies the new rules are an attempt to force Qantas to sell out quickly, but industry watchers say it might be in the Australian carrier's best interest. It may be able to extract more value from the region by dumping the codeshare and boosting its own services in Fiji via Jetstar.
Australia's largest mortgage issuer, Genworth Australia, is said to be considering pushing back its planned initial public offering, shying away from a tough market for new issues, according to The Australian Financial Review.
Earlier reports had Glenworth planning a $800 million float around June, but the date is now understood to hinge on the outlook for Australia's mortgage market. Goldman Sachs, Macquarie Capital, UBS and Commonwealth Bank of Australia are expected to run the offer.
NSW Treasurer Mike Baird will have a better idea about who will be running Sydney's desalination plant, as the deadline for final bids for a $2 billion long-term lease draws closer. With just days to go, the list of contenders is said to include Hastings Funds Management, which is partnering with Ontario Teachers Pension Plan and Korea’s National Pension Scheme (advised by Morgan Stanley and RBS Capital Markets), and Industry Funds Management (advised by Macquarie), according to The Australian Financial Review. Goldman Sachs is running the sale for the government.
The Australian Competition and Consumer Commission has ticked off on Amcor's purchase of Aperio Group, which owns manufacturing plants across Australia, New Zealand and Thailand. According to the regulator, the deal, worth $238 million, isn't expected to substantially lessen competition in any market.
Aquila Resources is said to be weeks way from selling its Washpool coking coal project, possibly to India's International Coal Ventures consortium, for around $300 million, according to a report in The Australian Financial Review. The miner could really use the cash, too, as it battles market fears about how it will meet its spending obligations at new coal and iron ore projects in Western Australia.
Also in the resources space, Beach Energy may be on the hunt for acquisitions after the company tapped investors for $335 million. UBS is out with a note that says the energy company is healthy enough to use the funds for non-organic growth, according to The Australian Financial Review, which lists Strike Energy and Icon Energy as possible targets.
Finally, Macquarie Capital is understood to have put its controlling stake in mining services business CQMS up for sale, possibly for about $90 million. The Australian Financial Review speculates that Bradken might be interested in the company, which makes products like dragline buckets and and excavation tools.