BREAKFAST DEALS: Fairfax clearance

Gina Rinehart reportedly fails to sell off a chunk of her Fairfax stake, while IAG contemplates its future in the UK.

Gina Rinehart has supposedly failed to offload about a third of her 15 per cent stake in Fairfax Media, but is there something else behind that apparent failure? Meanwhile, Insurance Australia Group might be facing the same fate as National Australia Bank in the UK – getting stuck without a buyer. Elsewhere, Thakral Holdings recommends an improved Brookfield bid, Qantas grounds a plane deal and Ramsay Health Care strokes a cash chest.

Fairfax Media, Gina Rinehart

Mining magnate Gina Rinehart apparently couldn’t find a buyer for about a third of her 15 per cent stake in Fairfax Media at 50 cents a share.

A number of media reports indicated that Morgan Stanley was trying to find a place for 80-120 million shares, but investors knocked it back.

Fairfax’s own Adele Ferguson, an unofficial Rinehart biographer, argues that the sale appears to have been designed not for a sure-fire sale. Hence, it was only a 1 cent discount to yesterday’s closing price.

Ferguson says the more likely situation is that Rinehart picked the day of the publisher’s depressing results, which included a $2.7 billion paper loss, to send the board a message: let me on the board, or I’ll sell.

It should be pointed out that Fairfax shares tumbled 10 per cent yesterday. It could also be that Rinehart picked the 50 cent target price before the stock opened.

But her decision not to rethink the asking price does suggest that Rinehart wasn’t willing to part with her stake for any price. Also, dumping that amount of stock does add to the downside for prospective buyers.

Fairfax is in a race to radically restructure itself before a suitor drops in to collect the company for a steal and split it up. Selling out at the bottom isn’t a good idea.

But it could also be the case that Rinehart has had a change of heart about the importance of reshaping the Australian media landscape.

Consider too that BHP Billiton’s latest set of results and decision to delay certain project developments has altered perceptions about which projects are and aren't viable well beyond BHP’s own portfolio.

Rinehart’s biggest game is the Roy Hill iron ore mine. The mining baroness has played her hand with Fairfax carefully, never succumbing to the temptation to just a throw more million around the secure a majority, from which she could dictate what she wants.

But, it could be that, like BHP, she sought to do more than she could when the times were good and now has to line up the ducks that matter. If there’s someone out there willing to pay 50 cents a pop to take them off her hands, so be it.

Insurance Australia Group

Insurance Australia Group has taken a $300 million writedown on its British insurance arm that mightn’t be put up for sale until next year, if at all.

The insurer has been conducting a review since May, but a possible writedown for goodwill and intangibles has been hanging over the troubled unit’s roughly $600 million book value.

Yesterday, IAG wrote down the value of the business by $297 million, which is still losing revenue in a difficult British market.

Chief executive Mike Wilkins said the review will be completed by the end of the year, but a sale isn’t the only option available.

Wilkins is laying the necessary groundwork for the eventuality of finding the same thing as National Australia Bank boss Cameron Clyne – no compelling buyers in the UK.

That’s always been a serious prospect for IAG, that it may repair the UK unit as much as it can, only to find there are no players around to pay a decent price.

Thakral Holdings, Brookfield Asset Management

It turns out the report that listed property investor Thakral Holdings had a sweetened takeover offer from Brookfield Asset Management was bang on.

The company announced a $2.6 million profit to investors, but that played second fiddle to the improved 81 cents a share offer from Brookfield, or roughly $470 million for the lot.

This will greatly please the company’s shareholders that watched the board repel a 71 cents a share offer with the backing of independent expert Grant Samuel.

Brookfield first put an offer on the table almost four months ago in the wake of securing the debt of the Thakral family and calling in the receivers.

The debt was held against mortgages over the family’s 39 per cent stake in Thakral, which drastically increased pressure on the target.

Qantas Airways, Boeing

Qantas Airways has found a way to prop up its bottom line by $US140 million ($134 million), cancelling a firm order for 35 new Boeing 787 Dreamliner planes worth $US8.5 billion.

The figure comes from a $US433 million in "contractual liquidated damages” that Qantas is entitled to in the event that it cancels the order, due to the long delays to Boeing’s Dreamliner model.

Chief executive Alan Joyce said the deal is a good one for Qantas, but others are asking what the implications are for the airline’s international arm in the long term.

"We still see the 787-9 as essential in allowing Qantas to compete against the Asian carriers longer term,” Macquarie equities analyst Russell Shaw said, according to Fairfax.

Qantas still has the right to purchase 50 of the long-range 787-9 planes, which won’t be delivered until 2016.

But the picture for Qantas’s international future will become clearer once it knows whether an alliance with other regional carriers can be secured.

Ramsay Health Care

Ramsay Health Care has about $1.5 billion that it can deploy on acquisitions and it "actively” looking for targets, according to The Australian.

Chief executive Christopher Rex spoke to the newspaper about the companies growth aspirations amid expectations of a long period of growth for the private hospital industry.

"We are in the fortunate position, given both our organic and brownfields growth, that we don't have to buy anything. But we do have a desire to do so," Rex said.

The chief executive apparently wouldn’t be drawn into what targets Ramsay could be lining up, with some whispers pointing towards British rival Spire Healthcare.

Speaking of Britain and healthcare, BUPA has a war chest of $3 billion that could easily be used in Australia, thanks again to the strength of our own healthcare sector.

The Australian Financial Review points to Regis Group, where Macquarie Group is hoping to jettison a 49 per cent stake. The newspaper also suggests Lend Lease’s aged-care assets as something available in the Australian market.

Wrapping up

Village Roadshow has decided against floating its production business for at least "three to five years,” sinking yet another knife into the troubled IPO market.

Meanwhile in mining, Sundance Resources has apparently failed to secure a long-awaited deal with China Sichuan Hanlong Mining in its meetings in Hong Kong, but a bit of progress has been made.

The Australian Financial Review understands that the price range being discussed is 45 cents to 47 cents, but some Sundance shareholders are pretty set on 50 cents.

And finally, keep an eye on Transpacific Industries Group for possible asset sales. There’s hardly anything certain, but the waste management company continues to place a high priority on its $1.13 billion debt burden and some analysts believe that offloading assets or selling property might are options for the company.


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