BREAKFAST DEALS: Echoing mine shaft

BHP Billiton and Rio Tinto appear to be pursuing similar sell-off strategies, while IOOF could pitch a rival bid for Trust Company.

Mining giants BHP Billiton and Rio Tinto are almost moving in step with each other with their asset sales. IOOF Holdings is reportedly thinking about throwing a spanner into the works of the antagonistic merger discussions between Trust Co and Equity Trustees with a deal of its own. Meanwhile, with GrainCorp in agreement with Archer Daniels Midland, attention is shifting to the next Aussie agri-deal; Sumitomo Corp has given Aquila Resources some headaches and an Andrew Forrest nickel vehicle is apparently set to look for funding in the US.

BHP Billiton, Rio Tinto

Mining giants BHP Billiton and Rio Tinto are continuing their asset sale drives as the strategy of global miners shifts from construction expansion to consolidation and core assets.

BHP Billiton offloaded its copper mine and rail asset Pinto Valley in the US state of Arizona to Canada's Capstone Mining for $US650 million ($632 million). BHP Billiton copper boss Peter Beaven said the sale was just one chapter in the miner's divestment program that has raised $5 billion for the miner already across a few commodities, including diamonds.

Speaking of which, rival Rio Tinto has reportedly put the idea of a $US2 billion float or other spin-off action for its diamond business despite strong interest from industry buyers. Minerals and diamonds boss Alan Davies made the comments in Perth yesterday, according to media reports.

The specifics of the mining giants' asset sale plans have been announced only recently as the pair moved from Marius Kloppers and Tom Albanese as their chief executives to Andrew Mackenzie and Sam Walsh, respectively. But the old guard had set the cogs in motion for the asset sales.

For instance, while Walsh is overseeing a potential IPO of Rio Tinto's diamond business, Albanese put the assets under a "strategic review" (read: sale process) over a year ago.

IOOF Holdings, Trust Company, Equity Trustees

Financial manager IOOF Holdings is reportedly thinking about a rival proposal for Trust Company.

The Australian Financial Review has received word from sources that IOOF hasn't made a decision on the idea of rivalling Equity Trustees, which is pushing for a $300 million-plus merger with Trust. But it's thinking about it.

Trust Co is unconvinced by the merger proposal and Equity has extended the offer until June 5. Without any other details on the potential deal, it's hard to really judge how this unconfirmed news impacts the current merger deal.

However, the apparent presence of another player can only strengthen the hand of Trust Co.

By the way, Equity's deal is all-scrip, which is a rarity in the post-GFC world if you exclude predatory opportunists. While it's not a live prospect yet, a bidding war between listed financials would also be a sight not seen in some time.

Archer Daniels Midland, GrainCorp, Allied Mills, Ridley Corporation, Nufarm

As US agricultural giant Archer Daniels Midland gets into the first of a few days to conduct due diligence on GrainCorp for its $3.4 billion offer, attention is already shifting for the next deal/s.

Straight up, some are wondering whether this could increase the chances of incoming owner ADM to sell off GrainCorp's majority stake in Allied Mills, which fellow industry player Cargill holds pre-emptive rights over.

Meanwhile, it's fair to say that some of the attention that GrainCorp got simply for being the most obvious listed Australian agribusiness player next to go in the global consolidation drive will be transferred to, well, the next most obvious.

They're shaping up as Nufarm and Ridley Corporation. The former lost an important deal with Monsanto; the latter offloaded its salt business Cheetham to Hong Kong's CK Life Securities for $150 million in late November.

Neither of these two is in GrainCorp's league, with its strategic export facilities on the east coast ideally positioned to export to China.

But this is a deals column. What else are we supposed to talk about?

Aquila Resources, Sumitomo Corp

Coal and iron ore miner Aquila Resources copped a big hit from the market yesterday when news sank in that Japanese giant Sumitomo Corp had pulled out of an exploration partnership.

A memorandum of understanding was inked between the two companies about 12 months ago in anticipation that Sumitomo would take a 20-50 per cent stake in some coal tenements in Queensland.

"Following two independent valuations, averaging $108.8 million on a 100 per cent basis, Sumitomo has elected not to acquire an interest in the tenements," Aquila said in a statement.

That sent the stock down 11 per cent. The reason was the Sumitomo deal was part of Aquila's asset sales program to help finance its $7.4 billion West Pilbara iron ore project.

It just shows the difference between the mammoth miners and everyone else. The big players offload assets so they can keep shareholders happy and proceed with their headliner projects. The smaller ones attempt to offload assets in order to keep their big asset plans alive.

When the story stalls, they get punished hard. When BHP Billiton and Rio Tinto fail to sell an asset, they cop grief for it, but not an 11 per cent equity plunge in one day.

Wrapping up

Iron ore kingpin Andrew Forrest's Poseidon Nickel is reportedly set to announce a mandate to Credit Suisse to book almost $200 million from the US debt markets.

According to The Australian, Poseidon will also reveal details of a "definitive feasibility study" on its Windarra nickel project. Forrest owns a 32 per cent stake in Poseidon.

Meanwhile, Industry Funds Management has taken over the running of Hastings Private Equity Fund II from Hastings Funds Management. The fund is a co-owner in clothing retailer Bras N Things.

In capital raising news, oil and gas explorer Drillsearch Energy is tapping the US bond markets for $US125 million to pay down debt.

And finally, Australian online retail observers are wondering if an industry-wide consolidation push is in the works, with Grays Australia picking up online department store oo.com.au.

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