BREAKFAST DEALS: CBA marches on

Commonwealth Bank flirts with the idea of an expansion into Indonesia, while the Qantas-Emirates tickets could soon be for sale.

Commonwealth Bank chief Ian Narev apparently has his eye on an Indonesian expansion courtesy of the Rabobank sale – Asian-focused ANZ Bank appears to be sitting this one out. The ACCC could give interim approval to the Qantas-Emirates tie-up today, allowing alliance tickets to be sold. Meanwhile, Naomi Cotton has a US giant on the line, Dale Elphinstone might still grab Engenco despite an unimpressed independent expert and Nathan Tinkler has reportedly saved his horseracing business.

Commonwealth Bank of Australia, Rabobank Indonesia

Commonwealth Bank of Australia’s market capitalisation is still dancing around the $100 billion-mark and it’s expected that Ian Narev will use some of that firepower on a run at Rabobank’s Indonesian business.

Reports out of Jakarta indicate that Commonwealth Bank is tipped to submit a preliminary bid for the $US400 million ($380 million) Indonesian arm of the Dutch giant. Industrial and Commercial Bank of China is unsurprisingly also being named in connection to the deal, according to Reuters, along with Qatar National Bank. It is believed that first round bids are due at the end of this month.

It should be pointed out that Commonwealth is hardly likely to use its market cap in the bid itself, $US400 million is too small for the bank to need to dip into its scrip. Shareholders would fume anyway.

But a healthy market cap gives chief executives more room to move when it comes to brining shareholders along for a takeover.

Commonwealth A already has 91 bank branches in Indonesia compared to ANZ Bank, known for its Asian super-regional bank strategy under chief Mike Smith, which has 28.

Indonesia is the elephant in the room when it comes to our engagement with Asian neighbours. India is too often forgotten in favour of China, while Indonesia is too often forgotten in favour of India.

While Indonesia has but a quarter of India’s population and even less compared to China, it’s right above us and half those citizens don’t have bank accounts yet.

As such, the competition that Commonwealth is likely to face in the race for the Rabobank unit – assuming the reports about its interest are true – will likely be fierce.

The problem facing the ultimate winner will be the new foreign ownership rules in Indonesia that restrict ownership of its domestic banks to 40 per cent. Exceptions can be made, but it’s not difficult to imagine it’ll be a tricky sell.

So far, ANZ’s name hasn’t popped up in connection to this opportunity. Smith’s run at Asia has been underpinned by the $US550 million acquisition of Royal Bank of Scotland assets across the region and the ANZ boss has made it clear that it’s organic growth from here unless something mandatory comes along.

Perhaps a $US400 million play for a single market is too heavy for ANZ.

Qantas Airways, Emirates

The consumer watchdog is reportedly set to announce interim approval for the Qantas Airways-Emirates tie-up as soon as today.

Interim authorisation allows the two airlines to begin selling tickets together and, according to media reports, that’s on the cards. Hang on, wasn’t that settled in December?

What the Australian Competition and Consumer Commission did was deliver its draft determination on the proposal and made it pretty clear to objectors like Virgin Australia that they’ll have to muster new arguments to block a final approval.

The regulator also shortened the original 10-year timeframe to five years. Final approval is due from the ACCC in March/April.

A quick look back shows this column, among others, erroneously referred to an ‘interim approval’ back in December.

Breakfast Deals didn’t report that Qantas and Emirates would be selling tickets together just yet, which is what an interim approval allows for, but did incorrectly use the phrase in place of ‘draft determination’.

In any case, this will turn out to be the smallest of footnotes. The ACCC has made it pretty plain that its ‘draft determination’ was the precursor to an almost certain final approval.

Namoi Cotton, Louis Dreyfus

Namoi Cotton shares surged 25 per cent yesterday after unveiling a $34 million deal with global commodity giant Louis Dreyfus.

The deal will create a joint venture called Namoi Cotton Alliance. The New South Wales cotton company will receive a 51 per cent stake in the joint venture, with Louis Dreyfus paying $30.4 million for the remaining 49 per cent.

Louis Dreyfus will also fork out $3.65 million for a 13 per cent stake in Namoi via a share issue. The commodity giant will also pick up a Namoi board seat.

At least 75 per cent of Namoi’s growing members will need to approve the deal, with a vote likely to come in February.

Approval is broadly expected; the company is still sitting on $159 million in debt according to the last accounts, a reminder of Namoi’s scare in late 2011.

Cotton prices went through an unprecedented period of volatility and Namoi shares collapsed to the tune of 75 per cent on the back of big losses and big borrowings.

Chairman Stuart Boydell said the proceeds of the deal would deliver some liquidity and strengthen Namoi’s balance sheet.

Seinfeld fans will see the name Louis Dreyfus and think: "That’s so funny because…”

And they’re right on the money. Julia Louis-Dreyfus, who just recently shook off the Seinfeld curse with a standout role in the HBO series VEEP, is the daughter of the company’s chairman Gerard Louis-Dreyfus.

So Namoi is celebrating because of Elaine’s dad.

Engenco, Dale Elphinstone

The independent expert for junior industrial company Engenco has concluded that the 18 cents a share takeover offer from major shareholder Dale Elphinstone is "not fair or reasonable”. But that mightn’t be enough to keep Tasmania’s richest person from seizing control.

Elphinstone, through his company Elph, has a 39.6 per cent stake in the company. The independent expert Lonergan Edwards & Associates is concerned about the prospect of Engenco shareholders being left hanging in the event that the bidder gets a majority.

Lonergan believes the target is worth between 21 cents and 27 cents a share, which is a suspiciously large range. The difference between the top and bottom of the range is 29 per cent, which is a lot.

Engenco shareholders, including Elphinstone, suffered an 80 per cent share price plunge last year. You can understand an opportunity to sell out now, when the alternative could be a low liquidity minority holding, might be too tempting.

RBS Morgan is providing financial advice to RBS Morgans, while Minter Ellison is handling legal.

Australian Securities and Investments Commission

The corporate regulator has finally spoken out about its stance on the debate the enforcement of the "best and final” declaration rule in takeover offers.

Australian Securities and Investments Commission commissioner John Price writes in The Australian Financial Review this morning, where he lays the groundwork for the regulator to take a tough line on this issue – tougher certainly than the Takeovers Panel.

"ASIC’s position is clear: we expect companies to honour a last and final statement,” writes John Price in the AFR.

"The statement is made voluntarily. The company should assume the risk for its statement. Anything else harms market integrity – and for ASIC this is not acceptable.”

The statements are the first ASIC has made after the truly farcical, but ultimately successful, bid by DuluxGroup for Alesco Corporation, where the bid was declared "best and final” only for the pair to engage in long negotiations over dividends and franking credits.

Wrapping up

Macmahon Holdings confirmed that Sembawang Australia, having watched its poorly timed bid for the company’s construction business get rejected, submitted another offer for the business at the same price with some clarifications.

The second bid was predictably rejected by Macmahon, which is selling a series of construction contracts to major shareholder Leighton Holdings, in order to focus more on mining services.

Meanwhile, Queensland Investment Corp and Queensland Motorways are reportedly negotiating a deal to secure the toll road assets of Brisbane City Council, positioning them well to secure control of the Clem Jones and Airport Link tunnels should they be put up for sale.

The Australian Financial Review reports that the deal would involve the Go Between Bridge and the $1.5 billion Legacy Way.

The Clem Jones tunnel went into receivership in 2011 and the Airport Link is of course held by BrisConnections.

For those interested in the Sydney casino power battle between billionaire James Packer and Echo Entertainment, keep an eye on the probe by Taiwanese authorities into allegations that illegal transfers between Taiwan and Macau.

The problem for Packer is that the offices of a Taiwan branch of a Melco Crown Entertainment subsidiary have been searched as a result of the investigation, which would no doubt be weighing on regulators as they contemplate the notion of Crown taking a bigger slice of Echo.

Meanwhile, Hong Kong’s Regent Pacific has offloaded its 20.1 per cent stake in BC Iron to institutional investors, according to The Australian Financial Review, courtesy of Macquarie Capital.

And finally, Nathan Tinkler has reportedly saved his $200 million Patinack Farm horseracing and breeding business by creating a phoenix company to house the group’s staff, according to The Australian.