BREAKFAST DEALS: Chasing Tiger

ACCC concerns are unlikely to take down Virgin's Tiger deal, while Arrium remains defiant after its writedown.

The ACCC is tipped to reveal some worries about Virgin’s purchase of a majority stake in Tiger Airways, but they probably won’t be enough to kill the deal outright. Arrium’s stock is holding up very well despite the writedown – will bidders come circling once again? Meanwhile, BHP Billiton is thinking about selling its troublesome Gregory-Crinum coal mine and REA Group does like the look of a German operation.

Virgin Australia, Tiger Airways, Qantas Airways, Emirates

The consumer watchdog is expected to nominate some problems with Virgin Australia that must be addressed if its purchase of a 60 per cent stake in Tiger Airways is to be approved.

The Australian Competition and Consumer Commission is set to hand down its initial findings today on the $35 million proposal that would see effective control of the lowest-possible-cost carrier transfer to its low-cost rival.

ACCC chairman Rod Sims has been pretty open about what’s coming in this decision. He’s spoken candidly about having to balance the strengthening of Virgin as a rival to Qantas Airways – which has all but secured the ACCC’s blessing for its Emirates deal – with allowing the low-cost operator to effectively take out the cheapest market participant.

Current Tiger owner Singapore Airlines is to take a 10 per cent stake in Virgin as part of the proposal, with the latter also separately picking up Perth’s regional carrier SkyWest for $100 million. The ACCC has given the latter proposal the thumbs up.

This columnist’s feeling is that Virgin will ultimately be allowed to take Tiger out, with some amendments and reassurances to the competition regulator.

Sims has just allowed Australia’s largest airline to join hands with one of the world’s most powerful carriers, which is backed by Middle Eastern oil money.

It would have to come up with some pretty good reasons as to why Virgin can’t take control of an airline that’s reputation sits somewhere between cheap-and-hardly-cheerful to an utter basketcase. The crucial difference is that Tiger is a domestic operators, whereas Emirates remains largely international.

Still, it’s up to the ACCC to ensure that it gets the best possible deal for consumers and that’s exactly what Sims is doing.

Arrium

Shares in Arrium shed most of the gains from earlier in the session on the back of a $474 million writedown to its steel division, thanks to the Australian dollar, external conditions and a weak construction sector.

The stock movement was minor because the writedown was non-cash and comes in the lead-up to the company’s interim profit numbers on February 19.

Chairman Peter Smedley will take some satisfaction from the fact that even with that intraday share price slip the stock is at 94 cents, still well above the 88 cents that Steelmakers Australia proposed for the company late last year. In fact the stock has been trading above those levels since the beginning of 2013.

Smedley and his fellow board members knocked back the Asian consortium, led by Hong Kong’s Noble Group and South Korea’s POSCO, even after it was improved from 75 cents.

It’s expected that Steelmakers Australia, or some other probably Asian incarnation, will have a crack at Arrium sometime later this year. The task for Arrium, like GrainCorp, is to keep delivering to justify their rejections.

At the moment, the sharemarket is backing Arrium to do the job.

BHP Billiton

The shift by the big two Australian miners to focus on core operations and divest what it can from what’s left is continuing at the big dog, BHP Billiton.

The miner has put its terribly high-cost Gregory-Crinum coking coal site near Emerald in Queensland up for a potential sale, while examining ways to extend the life of the troubled operation.

Gregory-Crinum is held in conjunction with Japan’s Mitsubishi as part of the BHP-Mitsubishi Alliance joint venture.

BMA added that it would take at least six to nine months for a sale to happen, depending on market conditions and other factors.

So let’s put this into perspective, the sale isn’t guaranteed to happen and if it did, it wouldn’t be on the cards until the second half of 2013.

But gone are the days where BHP picked its assets and then collected the winnings brought about by China’s insatiable demand.

REA Group, Deutsche Telekom, Scout24

Australian-based online real estate advertising player REA Group has reportedly confirmed its interest in taking out Deutsche Telekom’s online classifieds business, Scout24.

The Australian Financial Review reports that REA chief Greg Ellis believes that Deutsche Telekom hasn’t yet made a decision on whether to offload the business, but if they did decide to go down that road his company "might have a look at it”.

Reports about Deutsche Telekom’s interest in selling the business have been floating around for the last month, but the AFR has managed to attach REA’s name to the story for the first time.

REA is majority owned by News Corp, the parent company of this website.

There has been ongoing speculation that News might mop up the remaining shares in REA.

However, some believe that News will hold off on the deals front until the separation of the publishing and entertainment arms of the business.

Speaking of News, John Liberty Global is taking on Rupert Murdoch is a big bad way.

The fellow media billionaire has picked up Virgin Media for about $US15.75 billion in a cash-and-scrip bid, which is a pretty transparent pitch for the satellite cable market in the UK, which is dominated by Murdoch’s majority-owned BSkyB.

Ruralco

Ruralco chairman Robert England and managing director John Maher have wasted no time waiting for the endgame at former potential merger partner Elders to play itself out.

Shareholders at the company’s annual general meeting in Hobart heard that Ruralco has made a number of acquisitions to broaden its footprint.

The company has picked up the Newmarket Livestock business in Euroa, Victoria, along with the Moree Independent Rural business in NSW. It will also merge its Forbes, NSW joint venture called Wesfal with Central West Agriculture.

Unsurprisingly, England told shareholders his company is still interested in the Elders Rural Services business, but will have to wait and see what bidders emerge.

Wrapping up

Westpac Banking Corp went even further than doubling its hybrid issue. The Sydney-based lender will now raise $1.25 billion from investors, up from the $500 million originally sought.

While the extra raising isn’t surprising, as banks often lowball their raisings in the beginning, it just goes to show that the market rally isn’t enough to dissuade many investors from more stable investment vehicles.

Elsewhere, retail behemoth Woolworths has outsourced its road transport deliver to trucking major Linfox.

In reality, the move will only impact Victorian staff because Woolies has already outsourced its delivery trucks in every other state.

Finally, Pacific Equity Partners’s Link Market Services is understood to have provided the majority of the $33 million equity raising for electronic property settlements aspirant Property Exchange Australia, according to The Australian Financial Review.

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