BREAKFAST DEALS: DP World departs

M&A Christmas cheer for the infrastructure sector with Australia's largest port operator, DP World, selling most of its stake in its port business to Citi Infrastructure Investors. Given DP World's debt pile the strategic retreat makes a lot of sense but just don't call it a fire sale. Meanwhile, banks embroiled in the Storm Financial fiasco look to turn the tables on corporate regulator ASIC, Rio Tinto turns its attention to Russian diamonds and its full steam ahead for Foster's planned demerger. Elsewhere, a resource minnow backed by James Packer and Andrew Forrest engineers a backdoor listing, Molopo's billionaire investors call for the head of oil and gas explorer's chairman and Photon Group starts selling assets.

DP World, Citi Infrastructure Investors

Dubai ports operator DP World has agreed to off-load the bulk of its stake in its Australian ports business, DP World Australia, as it looks to reduce its debt burden. DP World has sold its 75 per cent stake in DP World Australia for $1.5 billion to private equity firm Citi Infrastructure Investors (CII) and an unnamed pension fund, which The Australian Financial Review suggests could be one of the heavyweight Canadian pension funds.  The deals will see CII, led by Australian Felicity Gates, take control of container terminals in Brisbane, Sydney, Melbourne, Adelaide and Fremantle. DP World, which is sitting on net debt of $5.9 billion, has been mulling options for its Australian operations since at least 2008 and there was talk that it was mulling a public float of the Australian operations. DP World entered the Australian market in 2006 after shelling out 3.3 billion pounds for UK's P&O's global operations in 2006 and a $US1.15 billion deal with CSX World Terminals in 2004. Those were boom times for Dubai which was riding high on the back of its rampant economy but the good times didn't last and with its property market falling in a heap by late 2007 DP World's parent, Dubai World, found itself buried under a mountain of debt. The ports deal is an example of the efforts underway to tackle that debt and also highlights its intention to shift focus on emerging markets. However, DP World is not completely out of the picture as it will retain management and branding rights to the business and has the option to repurchase its holding at a later date. In fact both DP World and CII have emphasised that the deal is a "strategic partnership” and the $1.5 billion price tag for a 75 per cent stake would suggest that CII certainly sees the port business in rude health.  Given Dubai World's pressing need to cut its debt pile the move is a necessary tactical retreat but it's not a fire sale by any accounts. DP World was advised by Deutsche Bank and Citigroup Global Markets while HSBC and UBS advised CII.

ASIC, Storm Financial, Macquarie, Bank of Queensland

Macquarie Bank, Bank of Queensland (BOQ) and Commonwealth Bank (CBA), the banks embroiled in the Storm Financial fiasco have struck back at the Australian Securities and Investments Commission (ASIC), after the corporate regulator decided to drag the banks to court. Interestingly, their riposte centres on the fact that Storm was a licensed financial planning firm with an Australian financial services licence (AFSL) which was issued to it by ASIC in 2003 and as Macquarie points out "expanded the scope of Storm's authorisations" in 2007. The banks have pointed out that any dealings with Storm were carried out on the basis that Storm's credentials had been checked by ASIC.  The argument raises the question of just how much responsibility should the regulator take given that it handed out the license to Storm. An ASIC spokesman told The Australian that the regulator does not "endorse the business model” of any company however, the paper points out recent evidence provided by the regulator to a Senate inquiry shows that procuring an AFSL is not a matter of meeting all the procedural criteria but also involves a close review of the business. The banks will no doubt try to argue that by 2007 ASIC should have had an idea that all was not well with Storm.  ASIC's decision to head to court came after 10 months of fruitless compensation negotiations with the three banks and it will be interesting to see just how effective the argument proves as a defence against the allegations levelled by the regulator.

Rio Tinto, Riversdale, Alrosa, Cloud Peak Energy

Takeover target Riversdale Mining is expected to come out of a trading halt today and the coal miner should provide the market with an idea of just exactly what the mooted deal with Rio Tinto entails. So far talk has centred on a $16 a share offer from Rio which values Riversdale at $3.8 billion and it will interesting to see just how friendly the transaction will be between the miners. Meanwhile, the mining giant has also been active in other sectors with news that it might be on the hunt to snap up a stake in a Russian diamond miner. According to Russia's Vedomosti newspaper, Rio is tipped to spend almost $US400 million to buy a 49 per cent stake in state-owned miner Alrosa. Elsewhere, Rio has completed a 100 per cent divestment of its equity holdings in Cloud Peak Energy Underwriters exercised their option to purchase 3,800,000 additional shares of Cloud Peak Energy's common stock for $US19.50 per share. The secondary offering of 25,600,000 shares and the over allotment closed on December 21. Gross proceeds from the over allotment were $US74.1 million, bringing the total gross proceeds from the secondary offering to $US573.3 million.

Foster's Group

It looks like full steam ahead for the demerger of Foster's Group's beer and wine businesses with the brewer naming a new chief for each of the divisions yesterday.  It will be business as usual at the beer division, Carlton and United Breweries, with current chief John Pollaers to lead the unit. The wine business, Treasury Wine Estates, will be run by David Dearle. Foster's current chief executive Ian Johnston is set to leave once the units are structurally separated in the first half of next year. There are no real surprises here given that Pollaers has been running the beer business pretty successfully but Citigroup analysts have pointed out that Foster's did have the option to place its US wine boss Stephen Brauer to run the wine units and Dearle's appointment suggests that the company was now unlikely to shift Treasury Wine's' domicile to the US. Of course there are many in the market who will wonder just how long a tenure Pollaers and Dearle will have once the demerger is completed given that a bevy of foreign suitors are reportedly lining up for both units.

Wrapping up

Some interesting moves in the market yesterday by a number of billionaires making their presence felt in a number of sectors. We start with the backdoor listing of resource minnow Amphion International which boasts the likes of James Packer, Andrew Forrest and Mutiplex heir Tim Roberts as investors. It looks like Amphion is set to be acquired by Medical Corporation Australia (MOD). MOD will issue 37.66 million new shares and 2 million unlisted options to Amphion shareholders to fund the purchase and separately raise up to $2.8 million, as part of its proposed move into the resources sector. Amphion is run by industry veteran Miles Kennedy who will join the board of MOD which will have $12 million in cash and the backing of Packer, Forrest and Roberts. Incidentally, MOD will change its name to better reflect its mining interests. The other story with the billionaires angle is the acrimonious situation developing at oil and gas explorer Molopo. A group of Molopo's investors, including billionaires Bruce Mathieson and Boris Lieberman, have called for an extraordinary general meeting to seek the removal of the company's chairman Donald Beard and non-executive director Bruce Hobnay. Molopo's other big wig investors include property developer Max Beck and Fairfax Media chairman Roger Corbett. Meanwhile, the rehabilitation of marketing services company, Photon Group, has moved forward with the sale of four digital companies to Salmat for at least $75 million. According to Photon, the asset sales will cut the company's debt balance to about $122 million. In other news, Drillsearch and Innamincka Petroleum have dropped their merger plans. Elders is reportedly planning to offload the sandalwood plantations of its subsidiary ITC. According to the AFR, the assets are expected to be picked up by TFS Corporation for $50 million. Elsewhere, Valad Property Group has reportedly received early takeover approaches for its European business from external parties even as its managing director Peter Hurley pushes on with his management buyout offer. According to The Australian, Valad has already fielded one indicative bid. Engineering and construction company Clough is looking for a new chief executive, after John Smith announced plans to step down next year and Fletcher Building boss Jonathan Ling is talking tough on his takeover offer for target Crane Group, telling The Australian that so far he has not considered any possibility of raising its bid, which comprised $3.43 cash and one of its shares for every Crane share.