BREAKFAST DEALS: Glencore grab

Mick Davis will take the helm of a merged Glencore-Xstrata, while Rio hits a valuation pothole.

Xstrata chief executive Mick Davis will get to fulfil his ambition of leading a seriously major player in the global resources space, having been unable to secure the gig at BHP Billiton. Speaking of which, BHP is reportedly close to sealing a $3.5 billion deal with the government of Gabon, while Rio Tinto’s Pacific Aluminium spin-off is getting some rather unflattering valuations. Meanwhile, National Australia Bank has finally conceded that its ground in the UK is not worth standing on, Gunns is expected to update the market on its mystery cornerstone investor and Macquarie Group gets something to cheer about amid the gloomy numbers.

Glencore International, Xstrata

Having missed out on the top job at BHP Billiton when the word 'Billiton' was added, Xstrata chief executive Mick Davis will get his wish to lead a global mining company that could one day rival his former employer and Rio Tinto, at least in terms of size. Glencore International and Xstrata have agreed to a ‘merger of equals’ proposal that will see Glencore acquire the 66 per cent it doesn’t already own. The all scrip offer gives Xstrata shareholders 2.8 shares for every share they hold, which equates to about a 28 per cent premium on the three-month-moving average.

Glencore chief executive Ivan Glasenberg, Australia’s second richest person, will become deputy to Davis and president of the combined group. The question begs, what will Davis do? The speculation is that he’ll have a run at Anglo American, with Xstrata having failed in a previous effort in 2009. But, as has been widely pointed out, in order to truly challenge BHP and Rio, Glencore will have to go hard into iron ore and siphon off a few assets in underperforming categories.

Rio Tinto, BHP Billiton

There’s no suggestion yet that Glencore would seek to exit certain metals with Xstrata in tow, which is probably just as well. Rio Tinto is starting to find out just how hard it is to sell something no one wants. News Limited brings word from Deutsche Bank analysts who have cut deep into their valuations for Rio’s Australian and New Zealand aluminium assets, spun off into Pacific Aluminium in the hope of eventually offloading them for good. Deutsche’s valuation has sunk to $US4.4 billion ($4.1 billion) from $US6.5 billion.

News Limited also believes that BHP Billiton is close to a $3.5 billion agreement with the government of Gabon over the Belinda iron ore site. This would constitute a big move into Africa for BHP, its largest to date.

National Australia Bank, Clydesdale, Yorkshire Bank

National Australia Bank chief executive Cameron Clyne might be forgiven for thinking that the British banking scene might improve quicker than it did, and it appears Macquarie Group made the same mistake. But after 10 years NAB has conceded that its British banking strategy isn’t working.

While it’s only a 'review', NAB has effectively put Clydesdale and Yorkshire Bank on the chopping block and it’s just a matter of which players Clyne can attract. The two banks have about 340 branches across Scotland and Northern England, usually in lower socio-economic areas.

Gunns

Tasmanian timber company Gunns is set to reveal its cornerstone investor today, with speculation still settling on New Zealand’s Richard Chandler, although fellow existing major Mathews Capital is also being spoken to. It’s been said that Chandler could be looking for a 25 per cent to 40 per cent stake in Gunns, which many onlookers see as undervalued with a current market cap of $106 million.

Gunns is set to raise between $250 million and $350 million to try to get rid of its $580 million debt burden. The Australian Financial Review reports that Gunns is running the strategy of the raising on its own. Perhaps it’s an ambitious move for a company raising many times the value of its market cap, or a necessary change of tone from a company that’s been out of luck for some time.

Genworth Financial

Macquarie Group management won’t be in the best of moods thanks to yesterday’s set of numbers, but there is something to smile about around the silver donut’s offices. The Australian Financial Review reports that Macquarie Group has officially picked up one of the joint lead manager positions for the Genworth Financial float. Commonwealth Bank’s broker arm, Commonwealth Securities, has also been blessed with one of four spots, along with UBS, and Goldman Sachs. Genworth is planning to float up to 40 per cent of its Australian arm, generating $800 million in the process.

MSF Sugar, Mitr Phol

Australia has officially waved goodbye to yet another local sugar player, this one going to Thailand. Mitr Phol has received commitments of 57.69 per cent for Maryborough Sugar Factory for its $4.45 a share takeover offer, worth a total of $313 million. It marks a profound quickening in events, with Mitr Phol making glacial progress towards getting a majority throughout December and January.

Wrap up

Leighton Holdings subsidiary Thiess has picked up a $1 billion contract to inject some more life into OZ Minerals’ prized Prominent Hill gold and copper mine. The mining services company will now conduct operations for OZ until 2018. Meanwhile, engineering and construction group Clough says its joint venture with Bam International has received word that it will win $140 million in work from the Ichthys LNG project.

In financial services, The Australian Financial Review understands that America’s Northwestern Mutual Life Insurance Company is thinking about selling Russell Investments, its asset consultant and funds management business. Whether it’s considering a sale of just the Australian operations or the entire footprint isn’t clear yet. Watch this space.

Shipbuilder Austal has picked up another order for a ferry from French Polynesian player SNC Aremiti Ferry.

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