BREAKFAST DEALS: Gloucester heat

The Australian coal sector surely can't get any hotter than this. Yanzhou Coal's Australian arm Yancoal is reportedly in discussions with Gloucester Coal about an $8 billion merger agreement. If this deal goes ahead, however, all eyes will be on precisely how Yancoal uses it to satisfy its deal with the Australian government to list 30 per cent of its local assets by the end of next year. Meanwhile, Woolworths is strengthening its grip on the NSW pub industry with a set of deals said to be worth $500 million. Elsewhere, James Packer is getting out of the Australian snowfields with his second deal in as many months, Billabong International will need to get creative if it wants to buy its way out of trouble with asset sales and Spotless Group chairman Peter Smedley has until the middle of January to deliver a presentation to Pacific Equity Partners. After that, shareholders could become a little irate.

Yancoal Australia, Gloucester Coal

Yanzhou Coal has reportedly engaged Gloucester Coal in preliminary discussions about a merger that could create Australia's largest independent coal producer, valued at $8 billion. The Financial Review has learned that Yanzhou's local arm, Yancoal Australia, is speaking to Gloucester about a possible backdoor listing of its Hunter Valley Coal assets. This could be crucial to satisfying its agreement with the Australian government to list at least 30 per cent of its local assets by the end of next year, an agreement struck over the $3.2 billion purchase of Felix Resources.

If a merger proposal is agreed upon and put to shareholders, it brings about the interesting scenario where a Chinese firm is on either end of the transaction – Yanzhou Coal on the bidder's side and Hong Kong's Noble Group on the Gloucester side, with 65 per cent of the target.

It marks a historic period in the history of Australian coal. New Hope is in the middle of a sales process, right on the back of Peabody Energy's purchase of Macarthur Coal. Meanwhile, the $5.1 billion merger of equals between Whitehaven Coal and Aston Resources is expected to make the largest independent coal producer, unless of course this deal gets up.

Woolworths, ALH Group

Supermarket giant Woolworths is celebrating Christmas with a few drinks. The company's hospitality arm, ALH Group, has signed long-term leases and purchased the businesses (and associated assets) of 30 pubs, hotels and one detached bottleshop in NSW from the Laundy, Waugh and De Angelis groups. The move means Woolworths will jump from owning 27 pubs in NSW to 58. Woolworths didn't declare how much this deal is worth, but The Australian has put a $500 million figure on it, saying that it could become part of a joint venture with publican Arthur Laundy.

James Packer, Living and Leisure Australia, Merlin Entertainment Group

Billionaire James Packer has made it two sales in as many months. The former media tycoon sold his 25 per cent stake in cosmetic skin care products company Jurlique International to Japan's Pola Orbis and has now supported the sale of his stake in Living and Leisure Australia. Britain's Merlin Entertainment Group, which owns assets like Madame Tussaud's waxwork museums and the London Eye, has put a $140.1 million cash offer on the table, at 5.14 cents per share. That's a 43 per cent premium to the previous trading price so it's unsurprising that Packer, through his company Arctic LES (Ireland) Limited, has thrown his almost 50 per cent stake in the target behind the offer.

In fact, the three largest shareholders – who together control 87.9 per cent of the company, which owns Queensland's UnderWater World, the Melbourne Aquarium and the ski resorts at Mount Hotham and Falls Creek – have indicated they'll support the deal. JPMorgan has provide the financial advice to Merlin, while Mallesons acted as legal adviser. Over at Living and Leisure Australia, it was UBS and ANZ Corporate Advisory that picked up the work.

Billabong International

With Billabong International shares plunging 43 per cent in a single day, opportunists will be watching closely. Analysts have been touting Billabong as a takeover target from time to time throughout this year, as its stock has now lost 75 per cent of its value in 2011. But no compelling suitor has emerged so far and the retailer has another problem. Because Billabong is a highly integrated company, it's hard for it to offload assets. If it's to be rescued in any meaningful way, in all likelihood it'll have to be for the whole company.

Austock, Intersuisse Group

Singapore's Intersuisse Group has swooped on Austock Group's securities and corporate advisory business. While the terms of the agreement have not been struck, Intersuisse has secured an exclusivity agreement, which is always a good sign. Due diligence will take place over the next month or so. This is particularly good timing for Austock because in the Intersuisse announcement it also took the time to update the marking on its trading conditions. "Several capital markets transactions have been terminated or deferred until improvement in market conditions is evident,” Austock said in a statement. "Consequently, corporate finance fee income is below budget in the current half, although the pipeline remains strong.”

Spotless Group, Pacific Equity Partners

Spotless Group chairman Peter Smedley reportedly has until the end of the second week of January to take suitor Pacific Equity Partners through a management presentation until a vocal shareholder loses patience. According to The Australian Financial Review, institutional shareholder Simon Marais of Orbis Australia says that's the point at which he'll start rounding up shareholders to try to call an extraordinary general meeting. PEP has put an indicative proposal to Spotless of $698 million, the second from a private equity firm this year.

Macquarie Renaissance Infrastructure Fund

Macquarie Group has taken one step forward in Europe this week, to go with its one step backward. The jointly managed Macquarie Renaissance Infrastructure Fund has picked up a $US83 million stake in Russia's GSR Energy Investments. This goes with the decision by Macquarie Infrastructure and Real Assets to offload its 9.9 per cent stake in Britain's largest water company, Kemble Water. GSR is a heat and electricity provider to industrial players around St Petersburg and the investment will bring its total funds under management to $US200 million.

Wrapping up

Eldorado Gold must be bullish about the gold price because it's decided to fork out $C2.5 billion ($2.4 billion) for European Goldfields, which would create a $C11 billion gold player. Still in resources, Guildford Coal might have to put its float plans for its Mongolia-focussed Terra Energy on ice. According to News Limited, Guildford has received a number of offers for its 70 per cent stake in Terra Energy and while it hasn't appointed a financial adviser yet to examine the approaches, about $155 million could be on offer.

Fairfax Media really looks to have moved on from its sales process for its metropolitan radio assets, by appointing Southern Cross Austereo Sydney general manager Adam Lang. John Singleton and Mark Carnegie have made enough signals to show they're still interested in the metropolitan stations, but Fairfax can't afford to wait by the phone.

And finally, as expected, Bendigo and Adelaide Bank increased its capital raising to $150 million from $120 million, thanks to demand from the institutions. The money will go towards its acquisition of Bank of Cyprus Australia.