BREAKFAST DEALS: Gassed up

Chevron's $29 billion Wheatstone LNG project gets the green light and despite the fears of cost blowouts and delays, the oil major is confident that everything will run on schedule. Meanwhile, Bow Energy's management backs a slightly sweeter bid from Arrow Energy after potential counter-bidders fail to appear, Ivanhoe Mines' shares tumble on rumblings out of Mongolia and the Canadian miner takes the time to tell Rio Tinto to comply with fair and accurate disclosure rules. In other news, the final countdown is on for ConnectEast's shareholders as they get ready to vote on the CP2-led consortium's $2.2 billion offer and Blake Dawson forges an Asian alliance with UK legal heavyweight Ashurst. Elsewhere, the slump in the Australian dollar makes SABMiller's buy of Foster's all that sweeter and the London Metals Exchange is open to suitors.

Chevron, Wheatstone LNG, Bow Energy, Arrow Energy

It's been a busy start to the week in the local energy sector with US giant Chevron rather unsurprisingly giving its $29 billion Wheatstone liquefied natural gas project the green light hot on the heels of receiving the tick of approval from Canberra, and Bow Energy's management recommending a slightly sweeter offer from its suitor Arrow Energy. Starting with Wheatstone, an expedited final investment decision was always on the cards once it was granted environmental approval for the project by the federal government. The FID was expected to drop in the second half of the year, however Chevron and its project partners – Apache, Shell and Kuwait Foreign Petroleum Exploration Company – are not wasting any time, with first major contracts reportedly set to be handed out as early as this week and construction to start by the end of the year. The foundation phase of the project is estimated to cost $29 billion and consists of two LNG processing trains with a combined capacity of 8.9 million tonnes per annum, a domestic gas plant and associated offshore infrastructure. First gas is planned for 2016 and, interestingly, Chevron has so far found customers for only 60 per cent of the output. However, the energy major said that it was in talks with potential customers about equity agreements and associated planned equity sell-downs to increase long-term off-take to more than 80 per cent. So far binding agreements have been signed with Japan's Tokyo Electric Power Co and Kyushu Electric Power Co. Tepco is still in the frame to buy a stake in Wheatstone with a deal expected in a couple of months. Chevron is already building the Gorgon LNG project on Barrow Island off the Pilbara coast and it's unlikely that Gorgon, or Wheatstone for that matter, will be immune to the cost blowouts and delays that have been witnessed at Woodside Petroleum's Pluto LNG project. However, Chevron Australia managing director Roy Krzywosinski has told The Australian that despite the vagaries of the Australian dollar and global market conditions, he was confident that Wheatstone will run on schedule.

Meanwhile, the board of takeover target Bow Energy has probably picked the best option for its shareholders by recommending Royal Dutch Shell and PetroChina-controlled Arrow Energy's slightly sweeter bid, given that no other interested party put up their hand to challenge the suitor. Arrow had originally lobbed a $1.48 a share offer in August. Bow was carrying a target price of $1.80 a share at the start of the year but was trading at 88.5 cents a share before Arrow's approach after taking a hit in volatile markets. While the premium looked attractive, detractors did point out that the offer was pretty slim in terms of the dollars per unit of reserves, especially when compared to other deals in the sector. Arrow's original offer was paying around 16 cents per gigajoule of Bow's proven, probable and possible reserves. That compares rather poorly to the 51 cents per gigajoule Santos is paying for Eastern Star Gas. The issue was a sticking point and Bow did open its data room to rival parties. However, it would seem that no counter bidders appeared and given the current economic climate, Bow's management has taken the safest option and they at least have a little something to show for it with Arrow raising its bid by four cents to $1.52 a share. Bow shareholders will vote on the deal in December.

Rio Tinto, Ivanhoe Mines

The rumblings from Ulan Bator that the Mongolian government is seeking a bigger stake in the lucrative Oyu Tolgoi mine have made a serious dent in the share price of Rio Tinto's project partner Ivanhoe Mines overnight, with the stock falling 12 per cent. While Rio has said that it will talk with the government with regards to potential changes to the existing agreement, Ivanhoe said in a statement overnight that it expected Ulan Bator to honour the existing investment pact, which was signed in 2009 following years of negotiations. Ivanhoe added that the existing agreement for Oyu Tolgoi remains a fair and legally binding contract and is fundamental in building Mongolia's reputation as an increasingly reliable and stable destination for foreign investment. The strong words from the miner didn't really inspire much confidence in the market as evidenced by the hefty fall in its share price, but at least Rio now has an indication of how Ivanhoe plans to deal with this situation and more importantly, it has an idea of just what piqued the wrath of Ivanhoe's boss Robert Friedland last week. The latest statement from Ivanhoe clarified the basis of its stern rebuke against Rio for publicising "unauthorised and incomplete information concerning the project.” Ivanhoe has refuted Rio's recent suggestions of a possible delay to the project because of a power supply issue and told the market overnight that the project was on track and it was confident that power won't be an issue. It added that it stood by the accuracy and completeness of its previous disclosures on the power supply issue and it will ask Rio to comply with a policy of public disclosure that is accurate and fair to all Ivanhoe shareholders.

ConnectEast, CP2, Horizon Roads

The final countdown is on for ConnectEast's shareholders as they get ready to cast their vote on the $2.2 billion offer tabled by the Horizon Roads consortium led by the toll road operator's largest shareholder CP2. The turnout is expected to be high in a process where every vote counts and while a final outcome is reportedly too close to call, The Australian's John Durie reckons that the deal is dead in the water. The final result is going to come down to whether the target's retail shareholders will truly be willing to look past the cash on offer, as for the institutional investors they would be far more inclined to leave things the way they are and vote 'no' at the meeting. There is little doubt that ConnectEast's shares will take a hit if the bid fails but it won't be the end of the road for CP2 which does have the option to creep to control by buying a 3 per cent stake every six months.

Blake Dawson, Ashurst

One of Australia's biggest law firms, Blake Dawson, has agreed to combine its Asian business with UK-based Ashurst's operations in the region to function in the space as a single heavyweight operator. Under the terms of the arrangement, Ashurst and Blake Dawson will combine their Asian businesses under the Ashurst brand and the local firm will also rebrand as Ashurst in Australia. The Asia combination and the rebranding of Blake Dawson is set to take effect by March next year and a full merger, which is conditional on a further vote of the partnerships, will be considered in early 2014.

SABMiller, Foster's Group

SABMiller may be on track to swallow Foster's Group by December but attention is already turning to the next big deal in the global brewing industry, which may happen a lot sooner than expected. That deal, which will surpass anything that has come before it, is the one between SAB and Anheuser-Busch InBev. The deal to end all deals in the sector would reportedly come with a price tag of around $US80 billion and Reuters reports that a 2013 timeframe is not out of the picture. We will wait and see how this pipe-dream pans out, but in the meantime the Wall Street Journal has picked up another thing that has seemingly worked out in SAB's favour, the weakness in the Australian dollar. With the local dollar hitting a nine-month low against the greenback yesterday, SAB's $US9.6 billion takeover is looking even better with the WSJ pointing out that it is set to pick up Foster's for $US900 million less than what its offer would have been worth three months ago. Elsewhere, it might be a tad premature to start talking about what management changes SAB intends to implement at Foster's but that hasn't stopped chatter about who might be in line to take the post of current Foster's boss John Pollaers if he decides to leave once the transitional phase is over. There is always a chance that SAB may stick with Pollaers and alternatively the unit can be overseen by SAB Asia boss Ari Mervis. However, as The Australian points out, there are some who reckon that former CUB boss and current Coca-Cola Amatil head of alcoholic beverages John Murphy may be in the mix. However, as the paper highlights, that looks highly unlikely given that the non-compete clause signed between SAB and CCA is likely to contain a no-poaching undertaking and CCA boss Terry Davis is unlikely to let Murphy go in the first place.

Wrapping up

We start with some news on Centro, with the AFR reporting that auditor PricewaterhouseCoopers wants Federal Court judge John Middleton to step aside from hearing shareholder class actions against Centro when they come to trial next year. Justice Middleton delivered his verdict on the eight Centro executives in August and said at the time that he agreed with claims that PwC had not alerted the Centro directors to changes in debt levels reported in the preliminary accounts and in the final version. With these claims to come under scrutiny in the class action litigation, the AFR reports that PwC has asked for Justice Middleton's removal on the basis of his actual and perceived bias. Meanwhile, Woolworths and its US partner in the Masters hardware chain have reportedly spent $429 million on land as they prepare to take the battle to Bunnings. According to Fairfax papers, documents show Masters invested $429 million in development properties and infrastructure throughout the 2011 financial year, despite the company running at an overall loss. In other news, Air New Zealand has increased its stake in Virgin Australia to just under 20 per cent as part of a strategy to boost its presence in the region. Air NZ boss Rob Fyfe has ruled out any chance of a takeover bid for Virgin and said that the move was designed to capitalise on the recent weakness in Virgin's share price, which reduced Air NZ's average cost of entry from 44 cents per share to approximately 40 cents per share. Finally, in overseas news, the world's biggest metal market, London Metals Exchange is apparently looking for suitors with reports that the exchange has opened its doors to a potential $US1.5 billion takeover. According to Reuters, the LME is considering a sale after receiving several expressions of interest, with CME Group and Intercontinental Exchange seen as likely suitors.