BREAKFAST DEALS: CSR shotgun

CSR considers piggybacking on Rio Tinto's aluminium sale, while hedge funds dig in over the battle for Nine.

It’s taken Rio Tinto a long time to get to the point where it can correct its most infamous mistake – acquiring Alcan to defend itself against BHP Billiton. Now that it’s offloading its less desirable aluminium assets, it appears CSR isn’t going to miss out on an opportunity to assess whether to sell its stake in the Tomago smelter – up to $500 million could be on offer. Meanwhile, things are getting a bit nasty between Nine Entertainment’s private equity owners CVC Asia Pacific and the hedge funds circling for a piece of equity. Elsewhere, Insurance Australia Group has turned recent rumours on their head with the purchase of New Zealand’s second-largest general insurer, AMI; Bendigo and Adelaide Bank is expected to increase its capital raising after big-time enthusiasm from the institutions; and Bow Energy shareholders will vote on the Arrow Energy takeover this week with nothing but green lights from the authorities.

CSR, Rio Tinto

Rio Tinto’s sale of its aluminium assets is likely to attract a number of buyers, but it looks like the mining company has managed to pick up a potential seller. CSR owns a 25 per cent stake in the Tomago aluminium smelter, which it owns through its 70 per cent stake in Gove Aluminium Finance (AMP holds the other 30 per cent). Rio Tinto Alcan owns 51.55 per cent of Tomago and it was thought when the miner announced that Tomago would be included in Pacific Aluminium – its enclave of unwanted assets that would be sold for between $US5 billion and $US9 billion – it was thought that CSR might piggyback on the process and exit its stake as well.

The thinking has turned out to be pretty sound. CSR chief executive Rob Sindel has told The Australian that the building materials company is considering an exit. "Do we want to get big in aluminium? No we don't. We want to grow our building products and see what happens to aluminium out of that process,” Sindel told the newspaper. "The interesting part about the Rio process is that a whole lot of things come out of it. It means that Rio has to consult with us when they are selling and we need to decide whether we are a buyer or a seller.” CSR could get between $400 million and $500 million for the 25 per cent stake.

CVC Asia Pacific, Nine Entertainment

Nine Entertainment private equity owner CVC Asia Pacific and its lurking hedge fund lenders Apollo Global and Oaktree Capital are all digging in over the battle for the media company. On the owner’s side, a source has told The Australian that the pre-2013 rights for the $2.7 billion in senior debt for Nine Entertainment indicates that the hedge funds can’t really force anything until February 2013, when the debt matures. However, the newspaper also reports that a source close to the hedge funds argues CVC is incorrect when it claims that all it has to do to get to the maturity date is to cover the interest payments.

CVC has made two unsuccessful attempts to come up with a debt restructure proposal that Nine’s lenders might be interested in, to no avail. Apollo and Oaktree are thought to be working on a proposal of their own over Christmas to convert their debt into equity – something that CVC is unlikely to be keen on.

Insurance Australia Group

Insurance Australia Group has emerged from its recent stint in the rumour mill with New Zealand’s second largest general insurer. IAG picked up AMI for $NZ380 million ($290 million), which is a crucial step for IAG’s planned expansion in the New Zealand market. IAG boss Mike Wilkins has managed to secure the company that wrote more than $NZ360 million in insurance premiums in the year to June 30 for over 500,000 customers, without the liabilities associated with the Christchurch earthquake – those have been taken on by the New Zealand government.

It’s been a confusing period for IAG shareholders. First rumours emerged that Wesfarmers was having a look at the predominantly east-coast insurer to partner its mainly Western Australian insurance footprint. Then it was reported in Malaysia that the Australian insurer was poised to make a run at Kurnia Asia, which could set it back up to $700 million. Nothing’s emerged on either of those fronts.

Bendigo and Adelaide Bank

Bendigo and Adelaide Bank has picked up the local arm of rival lender Bank of Cyprus with a $130 million bid, but the regional bank is reportedly set to increase its equity raising thanks to an enthusiastic suite of institutional investors. Bendigo unveiled a $120 million, fully underwritten capital raising at $8.45, which is a reasonably slim 6.1 per cent discount to the closing price before the announcement. This will put another 14.2 million shares on the register, or 3.9 per cent of issued capital. But according to Fairfax, Bendigo encountered a bit of a rush for the shares from institutional investors and is expected to increase the raising this morning. It was almost three times oversubscribed.

Arrow Energy, Bow Energy

Royal Dutch Shell and PetroChina have been given yet another key green light in their pursuit of Bow Energy. The target’s shareholders are set to vote on the proposal on Wednesday, safe in the knowledge that the Australian Foreign Investment Review Board has approved the $535 million takeover from Arrow Energy – a joint venture between the two companies – along with the Australian Competition and Consumer Commission and the necessary Chinese authorities. Arrow is looking for extra supplies for the LNG joint venture in Queensland.

Wrapping up

France’s Accor and its Singapore partner Ascendas have triumphed in the race for Mirvac’s hotels business, picking up 48 Mirvac branded hotels for $327 million.

In aviation, Qantas Airways is more focussed on getting a deal with its unions and an Asian carrier for its regional strategy, but it could be about to offload its Cairns catering business. The Financial Review understands that Qantas has received a number of offers for catering unit.

Meanwhile in minerals, The Australian reports that Carabella Resources is thinking about selling its minority stake in one of its core Queensland projects to raise funds. Iron ore miner Atlas Iron has sold its Balla Balla magnetite project in Western Australia for $40 million to Forge Resources. And Radhika Oswal, the wife of India’s Pankaj Oswal, has been unable to prevent ANZ Bank from selling her 35 per cent stake in the failed ammonia company Burrup Fertilisers.

Finally, Leighton Holdings subsidiary John Holland has secured a $100 million contract to build a new loading dock for the Sydney Opera House.