Breakfast deals: Fortescue gamechanger

What are the odds of Fortescue Metals Group selling a minority stake in its infrastructure? Probably longer after yesterday’s results. Telstra Corporation has picked up a business in Sydney after getting knocked back on Adam Internet. Meanwhile, Woolworths is shopping in New Zealand, Envestra is rocking the brinkmanship with APA Group and Nine Entertainment has a kick in its IPO step.

Fortescue Metals Group

It’s looking less and less likely that Fortescue Metals Group will sell a minority stake in its port and rail assets, housed in The Pilbara Infrastructure.

Chief executive Nev Power delivered a strong set of numbers yesterday. Even the company’s register, which is increasingly populated with shareholders who are impressed with Fortescue’s growing maturing, was surprised.

The stock jumped 4.2 per cent to $4.26, giving the iron ore miner a market cap of $13.3 billion.

That still leaves Fortescue with a substantial debt burden ($12 billion) considering its size and the sale of a minority stake in TPI was always meant to help get its gearing of Andrew Forrest’s company to something like 30-40 per cent.

Chief executive Nev Power said that, as expected, the company has received some interest from big players, but they haven’t met Fortescue’s hopes.

“We’ve received very significant offers, but those haven’t met our expectations so we haven’t proceeded with the transaction at this stage,” Power said.

He added that Fortescue will continue to look at its options, but the September 30 deadline for a decision will be pushed back again.

While Fortescue was expecting to generate something like $3 billion for the sale, the fact of the matter is the strategy came on the back of a plunge in iron ore prices and a debt scare for the company.

Now iron ore prices have recovered and Fortescue is by no means a forced seller. This means it is less likely to sell for prices that don’t reflect the value of the high-quality infrastructure it’s sitting on.

Telstra Corporation, NSC Group

Telstra Corporation has acquired Sydney’s unified communications and contact centre technology integrator North Shore Connections to strengthen its Network Applications and Services portfolio.

The financial terms of the deal weren’t disclosed, but The Australian Financial Review understands that it was worth $100 million.

The telco’s network applications and services boss David Burns said the purchase will make Telstra a leading player in unified communications solutions in Australia and strength its contact centre technology services.

Woolworths, EziBuy

Speaking of Australian giants, Woolworths has picked up New Zealand’s online retailer EziBuy for $NZ350 million ($306 million).

The Kiwi business sells clothing and homewares over the internet and through catalogues. The former will help develop the retailer’s online abilities and the former will cater to the behemoth’s bread and butter.

Chief executive Grant O’Brien said expanding the Woolworths’s “multi-option” business was a priority.

“This acquisition will provide us with a unique competitive advantage as we continue to develop our multi-option capabilities,'' said O’Brien.

“We believe the combination of our retail network, EziBuy's direct selling expertise and our respective loyal customer bases is a winning formula for us.''

O’Brien added that Woolworths will expand EziBuy’s current crop, which includes inhouse brands Capture, Urban, Emerge, Grace Hill and Sara and distribution of Otto and Next.

APA Group, Envestra

The brinkmanship between gas pipeline company APA Group and target Envestra has continued with analysts expecting a standoff to last for some time more.

Envestra managing director Ian Little told shareholders yesterday that he’s aware of the “ping pong” commentary between his company and APA, adding that it’s open to an “attractive” offer but isn’t “for sale” as such. 

“We received a proposal from APA and our board rejected that, and anyone is free to make a further proposal in the future – APA or anyone else,” he said.

If asked to nominate who ‘anyone else’ could possibly be, it’s easy to imagine the list would be short. APA holds 33 per cent of Envestra and would be unlikely to let that go without a tasty premium.

APA chief executive Mick McCormack said on Wednesday he would not consider raising his company’s all-scrip offer for Envestra without access to due diligence.

So there’s the window McCormack provided that to some extent explains Little’s language. If Envestra were properly for sale, due diligence access is quite readily granted.

Wrapping Up

Nine Entertainment has reportedly put a hitch in its giddy up for a float by meeting with its investment banks to set the “ground rules” for its float.

The Australian Financial Review expects Nine’s investment bankers at Macquarie Capital, Morgan Stanley, UBS and Commsec to begin due diligence “immediately” after meeting at Gilbert Tobin offices yesterday.

In resources, Santos has picked up a 50 per cent stake in an undeveloped oil field in Indonesia for up to $US188 million ($210 million) from AWE.

The half stake is in the Northwest Natuna production sharing contract, which pertains to the Ande Ande Lumut oil field. Santos would also become operator of the project if it’s brought forth.

Meanwhile, South Africa’s Gold Field has picked up three gold miners in Western Australian from Canadian giant Barrick Gold for $US300 million ($330 million).

Elsewhere, former takeover target Discovery Metals didn’t have any answers for the ASX when it was landed with a speeding ticket on the back of a 46.9 per cent surge in its share price to 23.5 cents. Something has to be behind this.

And finally, Quadrant Private Equity is set to launch a $750 million fund-raising drive early next year after finalising a $93 million investment in Perth, according to The Australian Financial Review.