BREAKFAST DEALS: Diamond suitor

Harry Winston courts both BHP Billiton and Rio Tinto for diamond assets, while Sundance and Hanlong fall out.

After months of speculation we may soon learn the fate of diamond assets belonging to BHP Billiton and Rio Tinto. However, with both miners apparently locked in talks with the same potential buyer, one sale is likely to fail. Elsewhere, Ansell expands into Europe, and things get rocky between Sundance Resources and Hanlong.

BHP Billiton, Harry Winston, Rio Tinto

BHP Billiton and Rio Tinto both appear to be vying for the affection of a single diamond suitor, which could leave one miner in tears.

The Financial Times puts BHP in long-running talks with Canada's Harry Winston regarding the sale of the Big Australian's Ekati diamond mine. Apparently the Toronto-listed diamond retailer, which is the last remaining bidder, has already locked in financing for a possible deal.

Regular readers will remember reports last week that Harry Winston was also in exclusive sales talks with Rio Tinto, which partners with the Canadian group at the Diavik diamond mine. Harry Winston is said to be considering the 60 per cent of the asset it doesn't already own.

However, the Toronto-listed company doesn't have the funding to support both deals, analysts and advisors told the FT.

The same sources say BHP and Rio will also struggle to secure the valuations they had in mind when they put their diamond businesses up for sale last year, before the latest global economic malaise.

This could force the Australian miners to reconsider their options. They may yet package and float their diamond businesses, or hold onto them while they wait for commodities markets to recover.

Either way, given the apparent late-stage nature of talks in both camps, we should know more soon.

Ansell, Comasec

Every sub-editor's favourite glove and condom company, Ansell, has made a $118 million bet on Europe with its purchase of France's Comasec.

Comasec, which boasts annual revenue of about $120 million, offers Ansell inroads into Europe's industrial and specialty gloves markets. The buyer expects the purchase to be "slightly" earnings accretive in fiscal 2013, and "strongly" accretive in the years beyond.

The deal, funded out of Ansell's existing cash and credit facilities, is a clear sign the Australian group is positioning itself to capitalise on an economic recovery in Europe – although, compared to its peers, Comasec has apparently been less affected by the debt crisis there.

It also signals that Ansell is comfortable enough with its balance sheet to snap into action if bargains emerge, even after four bolting on four acquisitions since April.

Indeed, the company's new chief, Magnus Nicolin, says he is actively looking for opportunities in Europe, North America, Latin America and Asia, including emerging markets.

Hanlong Mining, Sundance Resources

Talks between Sundance Resoures and Hanlong Mining appear to have soured, amid rumours the Chinese group has slashed its buyout bid by up to 30 per cent.

Reports last week suggested Hanlong would drop its offer for Sundance from 57 cents a share to 50 cents, after facing pressure from China's peak planning body. Word is, Hanlong is actually pushing for a price closer to 40 cents, which would value the Australian-listed company at $1.2 billion.

The Australian understands Sundance's board would reject a 40 cent bid. Apparently, it refused to even entertain the price.

Sundance, which is being advised by UBS, is already said to be working on an alternative arrangements if the Hanlong deal falls though.

After such high-profile sales talks, it's conceivable a new buyer might emerge.

Glencore, Xstrata

Xstrata renewed its commitment to closing a proposed merger with Glencore in the fourth quarter, but provided scant new detail about the mega-deal in its first-half earnings presentation.

Xstrata's profit result, more than 30 per cent lower than a year earlier, may actually come as a relief to Glencore, which has been battling some of Xstrata's largest shareholders over the value of its share-swap ratio.

Glencore is offering 2.8 of its shares for every Xstrata share, but there had been suggestions 3.25 Glencore shares might be more appropriate.

Six shareholders representing 15.1 per cent of Xstrata's register – just off the 16.4 per cent needed to vote down the deal – have called for a sweetened offer. That's bound to weigh on the companies' minds as the September extraordinary general meeting approaches.

Wrapping up

In another earrings revelation, Transurban says it might sell a US toll road that helped halve the company's annual profit result.

Traffic on the Pocahontas Parkway in Virginia dived after the financial crisis, which killed off a planned housing estate nearby. Transurban wrote down the value of the tollway to zero, and suffered $138.1 million on related impairment charges.

Meanwhile, DuluxGroup continues to up its stake in Alesco, as the target's shareholders drop like flies.

Yesterday, Argo Investments handed over its 2.4 per cent stake to Dulux, in what has become a heated, hostile takeover. Argo's sale follows similar moves by Northcape Capital and Wilson Asset Management, which apparently continues to buy Alesco shares on market.

Dulux says it now owns 41 per cent of its target. Alesco will be sweating.

Want access to our latest research and new buy ideas?

Start a free 15 day trial and gain access to our research, recommendations and market-beating model portfolios.

Sign up for free

Related Articles