Breakfast Deals: Final bets

The NSW government's set to decide on James Packer and Echo Entertainment's rival bids, while Aurizon cosies up to iron ore junior Brockman.

The New South Wales government is poised to make its decision today on whether James Packer’s Barangaroo dream will be granted, or whether Echo Entertainment’s planned expansion of The Star hotel will be realised instead. The smart money is on the billionaire.

Elsewhere, we don’t quite know how Aurizon will deal with Brockman Mining in the Pilbara, but it will have to haul iron ore somehow. Meanwhile, some Wilson HTM shareholders have bet on a buyout, tongues are wagging about Nine Entertainment’s move into Adelaide and Perth, and every one of Billabong International’s original lenders has bolted.

James Packer, Echo Entertainment

The 18-month jostle between Crown billionaire James Packer and rival Echo Entertainment over the future of the Sydney casino market will come to a head today when the NSW government announces the winner between their two competing proposals.

The state cabinet is due to meet this morning to consider the report by Future Fund chairman David Murray on the proposals. A press conference is expected to take place sometime after lunch with their decision.

The choice they have is between Packer’s up-to-$1.5 billion project at the habourside precinct of Barangaroo, which would include a six-star hotel and gaming facilities pitched towards attracting Asian high-rollers.

Echo is proposing a $1.1 billion expansion of the recently troubled Sydney casino The Star, which has exclusivity as a Sydney casino until 2019.

Packer’s rivals also threw up the idea of letting both proposals go ahead on the condition that NSW gamblers were banned from the Crown venue.

Murray has been critical of that last idea, which has fuelled speculation that Packer is likely to come out on top this morning.

Packer of course bumped up his stake in Echo way back in February last year to 10 per cent and sought regulatory approval to increase it to 25 per cent, only to sell his stake when the regulator’s finally came through in May this year.

In the background, Malaysian billionaire KT Lim has – barring the odd hiccough – increased his stake in Echo to 6.6 per cent in the lead up to today’s decision. Echo share volume bounced on Tuesday in a big bad way, leading to speculation that Lim’s company Genting Hong Kong was buying yet more shares.

Given that this is a betting story, let’s put it into horse-racing language. Breakfast Deals is backing the pedigreed Packer to comfortably beat Echo, which was recently troubled by self-inflicted injuries.

Aurizon, Brockman Mining

Mineral haulage company Aurizon has signed a binding "relationship agreement" with iron ore junior Brockman Mining, despite doubts that an independent port and rail line for smaller operators in the Pilbara is becoming less likely.

As Business Spectator’s Stephen Bartholomeusz explains, the ‘rail line for the little guy’ idea is hardly off the table and Aurizon is underlining its desire to diversify away from NSW coal.

For more details, read Bartholomeusz’s piece. It’s all there. But for the very busy amongst us, here’s the big takeaway from it: The Aurizon-Brockman relationship will be greatly influenced by Brockman and Atlas Iron’s request for third-party access to Fortescue Metals Group’s rail line, which is housed in The Pilbara Infrastructure.

Fortescue is of course trying to flog a minority stake in TPI with a deal expected sometime in the September quarter.

Watch that story.

Wilson HTM

Stockbroker Wilson HTM surged 19 per cent during yesterday’s session to 22 cents a share as speculators placed their bets on the likelihood of a management buyout from former chief executive Andrew Coppin.

The chief was expected to continue in the post after allegations of “inappropriate behaviour” were left without strong support from an internal investigation. But Coppin is thinking about buying out the stockbroker and, thus, stepped down. 

Yesterday’s movement still left Wilson HTM with a market cap of just $23 million, which is a very gettable target for a financially savvy, well connected individual.

Nine Entertainment, WIN Television

When Nine Entertainment emerged with its new hedge fund owners with next to no debt – compared to the billions held against it by former owner CVC Asia PacificDavid Gyngell said the network was ready to “rock and roll”.

Now we know a little of what he was getting at. The Australian reports that some analysts estimate Nine’s debt could top out at $1 billion from its current level of $700 million with the purchase of TV stations from WIN Television in Perth and Adelaide.

Whether or not that figure is accurate, it just goes to show how much more firepower Nine has post-CVC. It’s also worth remembering Nine has also managed to hold on to the broadcasting rights for the rugby and the cricket (for Ashes fans, Jackson Bird was the pick of the bowlers last night against Worcestershire).

Speculation is increasing that Nine’s ability to stay underneath the 75 per cent reach rule while taking the stations of WIN billionaire Bruce Gordon will spark the inevitable corporate activity between the regional networks and the metropolitan operators.

The parliamentary committee investigating former communications minister Stephen Conroy’s package of media reforms did recommend that the reach rule be scrapped and, barring any further capitulation in the quality of debate in Canberra, it is just a matter of when the rule is abolished.

The networks are hamstrung from doing much concrete between now and then, but Nine’s move could spark those famous ‘initial discussions’.

At the moment Nine’s regional affiliate remains WIN, Ten Network is linked to Southern Cross Media and Seven’s eastern country broadcaster is PRIME.

Billabong International

Billabong International has reportedly lost all seven of its original lenders as the troubled surfwear company continues to talk to its former suitors about recapitalisation and asset sale plans.

According to media reports, Bank of America Merrill Lynch and Societe Generale have joined the list of former Billabong lenders, which includes ANZ Banking Group, Commonwealth Bank of Australia, National Australia Bank, Westpac Banking Corporation and HSBC.

The debt sales have predictably come at a discount.

Despite all this, Billabong shares rallied 3 cents yesterday to finish trading at 19.5 cents.

Franklin Templeton, Mirvac Group, GPT Group

The focus on Australian property by major international investors shows little sign of abating with the $US720 billion ($783.7 billion) US fund manager Franklin Templeton reportedly focusing on the local sector.

The Australian reports that just as Henderson Global Investors and TIAA-CREF have put Australia in their sights, Franklin Templeton is looking at Australian property and “co-investment deals with local funds”.

The newspaper says sources indicate the fund is still only in preliminary discussions with local operators about establishing a club fund, but it’s keen to get this done.

While we’re on property, GPT Group has at long last offloaded its bulky good retail investors by selling Fortitude Valley Homemaker Centre for $103 million.

And finally, Mirvac Group has extended and increased its unsecured syndicated bank facility to $1.7 billion.

Wrapping up

The consumer watchdog is due to hand down its decision on Woolworths’ attempted acquisition of the Supa IGA store in the Canberra suburb of Hawker.

It’s expected that the Australian Competition and Consumer Commission will leave Woolworths disappointed and reject the move, making it the second knock-back in as many attempts for the supermarket giant.

Meanwhile, Woolworths supplier Casella Wines has reportedly sealed a two-year financing deal with its bankers as the falling Australian dollar seriously improves the major exporter’s position.

The Australian Financial Review reports comments from managing director John Casella that the deal follows lengthy negotiations with lenders after debt covenants in fiscal 2012 were breached.

Cheers to Casella, its lenders and the falling Australian dollar!

In resources, Indian conglomerate Aditya Birla is looking for a buyer for its Queensland copper mine, which could go for $250 million, The Wall Street Journal reports.

Speaking of India, Indian-owned Griffin Coal is running the risk of insolvency, according to The Australian Financial Review, after the company failed to meet a $13.9 million tax debt bill.

And finally, M2 Telecommunications will take a 12 per cent stake in wholesale telco aggregator Inabox after announcing its intention to throw $2 million at the company’s IPO.