BREAKFAST DEALS: Coal shoulder

New Hope meets a dead end in its long sale process, while fellow coalminer Aquila has more luck offloading assets.

New Hope’s decision to conduct a sales process helped squash some of the unrest over the cross-ownership structure it shares with Washington H Soul Pattinson and Brickworks that consolidates power to Robert Millner. Now, we can expect some of these tensions to re-emerge after the sales process fell over. Meanwhile, regulators are starting to look at whether Crown should be allowed to increase its stake in Echo Entertainment, even though it kind of doesn’t own it yet. Elsewhere, UK-listed Weir Group isn’t giving up the fight for mining services company Ludowici with another request to the Takeovers Panel, Extract Resources directors have given the green light to the China Guangdong Nuclear Power offer and the corporate regulator has its eye on banking hybrids.

New Hope

An optimistic name for a company when things don’t go well. After a five-month sales process Robert Millner has failed to find a buyer for coalminer New Hope, blaming economics uncertainty and tight credit markets for the outcome. The writing was on the wall earlier this month when the company ominously said during its quarterly results that it wouldn’t guarantee a transaction would take place.

This was a noticeable change in tone, given rather reassuring comments from Millner during the sales process when faced with suggestions it could fall over. It also sets a different tone to the one we’ve been getting used to: that players in China and India will pay almost anything to secure coal assets.

Complicating matters has been the upcoming Queensland election, with the Liberal National Party promising to block an expansion of one of New Hope’s mines.

Aquila Resources, International Coal Ventures

While we’re on coal, Aquila Resources is making headway in its quest to sell its Washpool coking coal asset to Indian state-owned firm International Coal Ventures. The company is going to need to raise a few billion to meet its end of the bargain on an iron ore joint venture in Western Australia, so the estimated $300 million that it should generate from the sale will help. Analysts estimate that it could get up to $700 million between Washpool and the Avontuur manganese deposit, which it is also thinking about offloading.

Extract Resources, China Guangdong Nuclear Power Corp

The independent directors of Extract Resources who have given their blessings to the $2.2 billion takeover offer from China Guangdong Nuclear Power Corp are failing to unearth a new bidder. The directors were right to look, but given that Guangdong now has Extract’s 43 per cent shareholder, the UK’s Kalahari Minerals, in the bag, there was very little prospect of being able to conjure an alternative proposal.

Now shareholders have been told the $8.65 offer is a good one. The next step is what Rio Tinto plans to do about the recommendation, given that it holds a not-too-shabby 14 per cent of Extract. While the global miner did hand its 11 per cent stake in Kalahari over to Guangdong, there hasn’t been any word about what it will do at the Extract end.

Ludowici, FLSmidth, Weir Group

Mining services target Ludowici is standing behind its leading bidder, Danish company FLSmidth, despite a rival bidder protesting a decision by the Takeovers Panel to allow the Danes to up their original bid. FLSmidth has an $11 cash per share offer on the table, while Weir Group is behind on $10. Quite what Weir Group could achieve from its application to have the decision reviewed isn’t clear – probably not much in the end. FLSmidth looks to have got out of jail and will bag Ludowici unless Weir stumps up more cash.

Crown, Echo Entertainment

Speaking of Queensland, regulators in the sunshine state and New South Wales will reportedly be looking at the 10 per cent ownership cap on Echo Entertainment amid the confusion about whether Crown is actually threatening that level. Fairfax reports that Queensland’s Office of Liquor and Gaming Regulation and the NSW Independent Liquor and Gaming Authority will consider whether to allow Crown to lift its stake above 10 per cent in the event that it actually claims its existing 10 per cent.

There was no word from Crown yesterday about just how it has managed to build a 10 per cent stake in Echo but not declare itself as a major shareholder, or on why it expects to get away with it.

Wrapping up

The lucky winners of the long-term lease of Sydney’s desalination plant are reportedly close to being named. News Limited brings word from a person familiar with the situation who says the list has been narrowed down to Industry Funds Management, Hastings Funds Management and Ontario Teachers’ Pension Plan, and Acciona and Mitsubishi subsidiary Trinity.

Base metals miner Kagara is believed to have offloaded its Lounge Lizard nickel mine for a figure of as much as $80 million, The Australian reports. As expected, Western Areas has picked it up.

The West Australian government has given the thumbs up to a rail and supply project to connect the Hope Downs 4 iron ore mine, the joint venture of Rio Tinto and Hancock Prospecting, to the existing Hope Downs 1 mine.

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