BREAKFAST DEALS: Cut-price Billabong

Billabong's offers are apparently even lower than expected, while Rio Tinto ramps up the sales process for its non-core Australian assets.

Billabong International’s bid prices have found their way into the press and the news isn’t good. In fact, it’s terrible. Rio Tinto has apparently hired another adviser team for a New South Wales copper-gold mine. Elsewhere, Nathan Tinkler’s Whitehaven stake is reportedly being ‘shopped around’, Sundance Resources has to wait out a long weekend in China before it can break ties with Hanlong Mining and Shell's Geelong refinery isn’t the only Australian asset feeling the sell side pressure.

Billabong International

It looks like it’s worse than we imagined for Billabong International and founder Gordon Merchant.

The Australian Financial Review reports that Billabong chairman Ian Pollard is considering a takeover offer from former director Paul Naude, backed by New York-based private equity firm Sycamore Partners, of about 60 cents a share, or just $287 million.

When Billabong International was suspended from trading, shareholders were concerned that the bidding consortiums were going to significantly wind back their offers from the indicative $1.10 a share, or $527 million. Did they ever! Two years ago the stock was changing hands at $7.50.

Rival bidding consortium VF Corporation and Altamont Capital Partners could only bring themselves to pitch an offer that was less than 50 cents a share, according to the newspaper.

That’s probably the worst bit of news because the disparity between the two bids indicates there’s no competitive tension at 60 cents. VF just wouldn’t buy it for that price.

Billabong shares last changed hands at 73 cents a share.

The report does not indicate whether either of the offers was put in the form of a binding proposal. Even after months of due diligence, we’re guessing not.

We’re also still in the dark on whether Naude-Sycamore would allow Merchant to stay invested in the company. At 60 cents a share, his 15.7 per cent stake is worth just $45.1 million.

Rio Tinto

Mining giant Rio Tinto has reportedly hired Macquarie Group as well as Deutsche Bank to look at potential asset sales in Australia.

According to The Australian, Rio has tapped the Australian investment bank to look for a suitor for its majority stake in Northparkes copper-gold project in New South Wales. Rio last valued the asset at $US405 million ($389 million).

This comes on the back of news that Rio boss Sam Walsh has apparently appointed Deutsche to look at ways to sell down some coal assets in New South Wales and Queensland.

The fact that the miner is looking at selling a copper-gold project as well as some coal assets isn’t particularly significant. Most commodities are showing signs of weakness.

The central theme is these are non-core assets that aren’t likely to generate the high margin returns Rio, and indeed the other big miners, are looking for.

Nathan Tinkler, Whitehaven Coal, Farallon Capital, Noonday Asset Management

Once again the ground beneath coal tycoon Nathan Tinkler’s feet appears to be shrinking if media reports are anything to go by.

The Australian reports that Noonday Asset Management, a subsidiary of Farallon Capital, has been “shopping” around Tinkler’s 19.4 per cent stake in Whitehaven Coal.

The newspaper understands that a range of options for the stake are available and a move on Tinkler’s primary the asset “could be imminent”.

This isn’t the first time we’ve thought that Tinkler has been up against it when it comes to his Whitehaven stake. Forget the court cases – back in November last year there were widespread reports that the coal baron was to be hit with a “liquidity event”.

After that, things were quiet. Although back then Tinkler wasn’t trying to sell his beloved horse racing business Patinack Farm.

Sundance Resources, Sichuan Hanlong Mining

Two Chinese holidays falling at the end of this week have delayed the inevitable cancellation of the $1.3 billion takeover offer that never was for Sundance Resources.

The African-focussed iron ore miner informed the market yesterday what everyone knew was coming – suitor Sichuan Hanlong Mining has failed to deliver on the $5 million tranche-two funding that was due on Wednesday. Hanlong started missing more deadlines with Sundance than it has met long ago.

“Sundance has issued a demand notice to Hanlong under which it must pay the $5 million tranche by no later than Monday, 8 April,” Sundance said in a statement.

Monday is also the new starting point from which Sundance can call the takeover talks off. When Hanlong failed to deliver the credit approved term sheet from China Development Bank last week, a five-day grace period where the companies would negotiate in good faith, before either can cancel the scheme of arrangement, ended on April 3.

China has a long weekend that’s ending on Monday.

Presumably, Hanlong will have until the end of business Monday to deliver on the $5 million. After that, we can finally put this deal to rest and Sundance can start talking to its shareholders about alternatives.

An official from China Development Bank spoke to a Sichuan newspaper indicating that it hasn’t approved plans to give Hanlong $US1 billion because of the detainment of its chairman Liu Han.

This isn’t news. If anything else was the case, like discussions were continuing or approval was imminent, Hanlong would be shouting it from the rooftops.

But at the moment, Hanlong doesn’t have a chairman or financing. For all we know they don’t have $5 million for Sundance.

Royal Dutch Shell

As has long been anticipated, Royal Dutch Shell has put its Geelong oil refinery up for sale. Shell had already closed its Clyde refinery in New South Wales, with rival Caltex following up by doing the same to its Kurnell refinery in Sydney.

It’s broadly expected that Shell won’t find a buyer and will ultimately convert the site into an importing terminal. For more details read Business Spectator’s Stephen Bartholomeusz.

Another thing to keep your eye on when it comes to Shell is the company’s stake in Woodside Petroleum.

The Australian oil and gas investor’s play for LNG fields in Israel has brought forward an argument from Commonwealth Bank analysts that Shell might exit its stake in response because of its extensive investments in the Middle East and the tensions that an Israeli investment might bring.

Woodside managing director Peter Coleman is making preparations for the moment when Shell decides to exit its 23 per cent stake and would no doubt like to see it happen sooner rather than later to take some downward pressure off the share price.

Imagine if the Israeli investment was part of an elaborate strategy to encourage Shell’s exit. We’re hardly suggesting it is. That’d be nuts, but impressive at the same time.

Wrapping up

The consortium led by Ontario Teachers’ Pension Plan Board and Hastings Funds Management is strongly thought to be the favourites to win the bid the Botany and Kembla ports, according to The Australian Financial Review.

Bids are due on Monday and the newspaper has received word from bankers that the access to cheaper capital that the Canadians have over their prospective competing bidders puts them in a strong position to win this race.

The losers needn’t worry. There will be more Australian infrastructure opportunities on the horizon.

Meanwhile, Macquarie Atlas Roads chairman David Walsh all but ruled out acquisitions in the near term as the toll roads operator takes a look at the future of its portfolio.

And finally, the Australian Office of Financial Management has sold $1 billion on Treasury notes on behalf of the Australian government with a coverage ratio of almost 8 times.

International investors love Australian government debt.

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