BREAKFAST DEALS: Freeway debris

The collapse of BrisConnections and RiverCity Motorways has cast a shadow over certain structures that Victoria might use for its own road infrastructure project and ConnectEast boss Dennis Cliche is more than happy to point it out. Speaking of shadows, Sundance Resources stock is in a trading halt at a mindblowing discount to the offer price from Hanlong Mining. Meanwhile, Cyprus jitters have underlined the fragility of IPO optimism, Tom Waterhouse looks to have a partner offer on the go, Equity Trustees has a good case for a Trust Co merger and New Hope is thinking beyond coal.

BrisConnections, RiverCity Motorways

The shockwaves of the collapse of companies backing road infrastructure projects in Brisbane and Sydney are being felt in Melbourne as the state government looks for ways to link the Eastern Freeway with the Western Ring Road.

According to The Herald Sun, ConnectEast boss Dennis Cliche wants to purchase the Eastern Freeway for $1 billion and turn it into a tollroad, which would free up some funds for the state government to build its underground tunnel.

The Department of Transport is compiling a report on the various options facing the state that will be handed to the government later this year, but given the political aversion to raising more debt, Cliche’s proposal might not be a bad one.

“The choice has to be made between incurring debt and raising taxes, or charging those who will benefit from needed infrastructure such as east-west,” he said, according to the newspaper.

“The cost of the first stage of the tunnel has been put at roughly $5 billion, of which the federal Opposition has pledged $1.5 billion, leaving the state to find $3.5 billion from tolls or debt.”

Victoria has fixed four-year terms and the newly installed Denis Napthine will no doubt be hesitant to recommend a tollroad, which are never the most popular of proposals, with an election slated for November 2014.

However, the collapse of BrisConnections and RiverCity Motorways, in no small part because of poorly structured agreements with the state government – Transurban wasn’t having a bar of the Brisbane Airport link – suggests Victoria mightn’t have any choice.

Just get ready for interest from foreign pension funds if the southern state does opt for the tollroad option.

Speaking of which, Fairfax reports comments from the Canada Pension Plan Investment Board that it wants to invest more heavily in Australia, even though it’s already overweight, because we provide exposure to Asia’s growth without regulatory risk.

Sundance Resources, Sichuan Hanlong Mining

To say that there’s been a spectacular collapse in confidence for the proposed $1.3 billion takeover of Sundance Resources by China’s Sichuan Hanlong Mining is really saying something.

But that’s what has happened. In the last three trading sessions, Sundance shares have dived 17 per cent amid reports that Glencore International could be looking to take a stake in the company’s Mbalam iron ore port and rail project that straddles the border of the Republic of Congo and Cameroon.

Sundance was forced into a trading halt yesterday as doubts about Hanlong became so bad that the stock slumped to 25.5 cents each. That’s an astonishing 43.3 per cent discount on the offer price – simply unheard of.

The next deadline we’re looking for is Tuesday, when Hanlong is supposed to have secured a credit approved term sheet from China Development Bank.

Waiting for our mega-IPO

While the Australian deals market has been showing signs of optimism over the last few months that 2013 might be better than 2012, particularly for IPOs, activity so far this year is down 50 per cent on last year.

The Australian reports that private equity investor US Select Private Opportunities Fund II is preparing to launch Australia’s second largest float of 2013.

They’re raising a miniscule $65 million.

It was always the case that the float market resurgence would only ever come in the second half of the year, with players like TRUenergy and Genworth Financial spoken about with an eye towards spring.

But it’s equally the case that the optimism surrounding the IPO market stemmed largely from the markets rally from November 16 that peaked on March 11 at 18.3 per cent at a close of 5146.9 points.

Thanks to the problems in Cyprus, the market has slid back below the 5000 point mark again.

The market is still up 14.7 per cent since November 16 and the buzz around the IPO market remains for the second half of the year.

It just goes to show, however, that the central bank money printing that so enthused the market for an IPO-comeback only goes so far.

It remains a volatile environment.

Tom Waterhouse, Ladbrokes

Tom Waterhouse has reportedly received an offer from a British bookmaking company that would value his betting business at $200 million.

According to media reports, Ladbrokes has offered to buy a 50 per cent stake in Waterhouse’s business with the option of moving to full-ownership up to five years from now.

The reports also indicate that Waterhouse wants to stay involved in the business and is unlikely to accept an offer for full ownership at the moment.

Equity Trustees, Trust Company

Somewhere in the 141-page bidder’s statement from Equity Trustees is a pretty compelling case for a merger with fellow financial service provider Trust Co.

Equity Trustees can see $8 million in synergies on a pro forma basis. A combined profit of $19.2 million between the two firms for the 12 months to August last year would have been $23.5 million on its numbers, almost a full quarter more.

The market is also giving Trust Co shareholders some reason to say yes to the proposal. The offer is all-scrip – a rarity in today’s market – and Equity Trustee stock has risen 10.6 per cent since the deal was announced.

As such, the 33-for-100 scrip proposal is now worth about $5.85 to the target shareholders, which is a 23 per cent premium on the price their stock was trading at before the bidder came knocking.

Equity Trustees is also extending an olive branch by structuring the deal so Trust Co shareholders ultimately end up with 59 per cent of the combined $350 million company.

New Hope Corporation

Coal miner New Hope announced a first half profit fall of 32 per cent, but the share price bounced on account of the number being a little better than expected. That, and New Hope’s ambitions are stretching beyond the beaten down commodity.

New Hope chief executive Robert Neale says the company wants to expand into oil and gas to become a more diversified player. The company’s shares are down 26 per cent over the last 12 months thanks to the coal price slump.

Importantly, Neale says he’s willing to use M&A to get there. With a warchest of almost $1.3 billion, that statement should not be taken lightly.

The question is what balance New Hope will strike between seeking diversity in a down market for thermal coal and seeking opportunities from competitors looking to exit it.

Between BHP Billiton, Rio Tinto, Xstrata and Peabody Energy, there are some big coal operations that are either shedding jobs or under review. New Hope would be well aware that there could be some bargains out there in coming months.

While we’re on energy, African-focused oil junior FAR Limited has signed an $US80 million ($77 million) farm-in agreement with London-listed Cairn Energy for its offshore exploration assets in Senegal.

And speaking of Britain, the English giant BG Group has handed a $US620 million services contract to US behemoth General Electric.

GE boss Jeff Immelt announced the deal from Brisbane yesterday.

Wrapping up

Department store David Jones is releasing its first half numbers today. Keep an eye out for any updates on its property strategy.

We might also get some details on a capital raising from troubled aquaculture company Clean Seas Tuna, which went into a trading halt yesterday.

The ASX-listed World Titanium Resources has also addressed a financing problem, by bringing in China’s privately-owned Sichuan Lomon Titanium to help develop its mineral sands deposit in Madagascar for $US300 million.

And finally, India’s Jindal Steel and Power has thrown $10 million into junior Apollo Minerals as part of a bet on South Australian iron ore.

Apollo’s stock jumped a slightly more than respectable 20 per cent on the news.