BREAKFAST DEALS: Gloucester sitting pretty

Gloucester Coal is reportedly set to sign off on a deal with Yancoal, although may yet receive a better bid, while Billabong's founder puts his money where his mouth is.

Gloucester Coal is in a formidable bargaining position. Yanzhou Coal promised the Australian government that it would list at least a third of its assets on the local exchange in order to secure Felix Resources in 2007. Now a listing through a merger with Gloucester, given recent volatility, is the best option for it with an end-of-2012 deadline. Gloucester’s independent directors are reportedly set to give the proposal the green light, thanks to a little bit more equity. Meanwhile, Billabong International founder Gordon Merchant can talk the talk, forking out almost $8 million for his company’s stock amid overtures from TPG Capital. Elsewhere, investors are waiting eagerly for Genworth Financial to start talking floats, National Australia Bank is leaning on consultants in the UK – what will happen to Clydesdale Bank, one wonders – and Ludowici is understandably vexed by the Takeovers Panel.

Gloucester Coal, Yanzhou Coal

The independent directors of Gloucester Coal are reportedly moving towards giving the $8 billion merger with the Australian operations of China’s Yanzhou Coal, Yancoal Australia, the green light amid expectations that a higher offer is forthcoming. According to The Australian, a positive recommendation from the independent directors is tipped to be signed off on by the Gloucester board this week and 64.5 per cent shareholder Noble Group could give the thumbs up as soon as today.

The newspaper understands that Yanzhou has tweaked the ratios a little so it would receive slightly less of the combined company than the original 77 per cent that was first proposed. That means that we should expect Gloucester shareholders to receive their $3.20 cash per share and a little more than 23 per cent of the final entity.

New Hope, Perpetual

While we’re on coal, New Hope chairman Robert Millner and his company’s major shareholder Perpetual are trading barbs in the press about the failed $5 billion sales process. Expect some more from this as there’s a lot more bad blood to come out.

Billabong International, TPG Capital

You’ve got to hand it to Billabong International founder and director Gordon Merchant, because he’s willing to put his money where his mouth is on the matter of the clothing company’s value. According to documents filed to the ASX late Friday, Merchant has splashed $7.9 million on 2.52 million shares – $3.13 a pop – to increase his stake in the company to 15.8 per cent from 15.1 per cent.

Last week, Billabong rejected a proposal of $3.30 a share from private equity firm TPG Capital and Merchant threw in for good measure that an offer of $4 a share would meet the same fate. News that Merchant is willing to pick up shares in the company for $3.13 each reassures investors that he certainly believes the company is worth more than the $1.79 it was trading at before the takeover speculation really took off.

Alternatively, sceptics could view this move as a way of slightly increasing his hold on the company. Given it’s widely acknowledged that his associated interests control enough of the company to put a bullet in any offer that he can reasonably argue isn’t high enough, there’s just as much chance he’s genuinely bullish on the company’s future.

Genworth Financial

Given that US giant Genworth Financial is looking at floating 40 per cent of its Australian business onto the local exchange in the second quarter, and we’ve only got one month left of the first, things should be ticking along by now. Perhaps they’re only just about to. The Australian Financial Review says the analysts have only been given a single briefing from Genworth boss Ellie Comerford and her financial officer Anne O’Driscoll, but that was only a general yarn about the business.

Then again, too much pressure shouldn’t be put on Genworth – the market’s just very keen to see how a heavyweight float goes and Genworth is the first off the boat for 2012.

National Australia Bank, Clydesdale Bank, Yorkshire Bank

While National Australia Bank chief executive Cameron Clyne has characterised the 'review' of the Australian bank’s UK operations as nothing more than that, many onlookers are still wondering whether this is the beginning of the end. According to The Herald Scotland, NAB has sought the Boston Consulting Group to advise it on the restructuring. The group will reportedly be working with Clydesdale boss David Thornburn, who has already warned that job losses could be on the cards.

Ludowici, FLSmidth, Weir Group

Ludowici director and its largest shareholder Julian Ludowici is understandably frustrated by the decision by the Takeovers Panel to consider another objection from UK-listed Weir Group to the bid from rival suitor FLSmidth. Ludowici has watched his company’s share price go from $3.50 a pop to above $11 thanks to a bidding war between these two companies, but now the process is in a bit of limbo since the panel decided to review problems Weir Group has with LFSmidth’s apparent violation of Australia’s truth in takeovers laws.

Speaking to The Australian Financial Review from the US, Ludowici said the company’s shareholders – including himself obviously, with more than 25 per cent of the register – have been left stranded. "There is no need to review what has already been done,” Ludowici said, adding that it raises concerns about international companies wanting to pursue Australian plays in the future.

Virgin Australia, Etihad Airways, Qantas Airways

Etihad Airways is continuing to target Virgin Australia as a means of gaining greater leverage in the Australian market as the Sir Richard Branson brainchild looks to international investors. Etihad chief executive James Hogan has made absolutely no secret of his interest in Australia’s Virgin operations and has reiterated that interest to the Herald Sun. "If the opportunity is there, we’d be very keen to take a piece of Virgin Australia,” Hogan said, according to the paper.

Meanwhile, Virgin’s main rival Qantas Airways hasn’t had its wish to extend its alliance with South Africa Airways covering flights between Australia and Johannesburg fulfilled. The International Air Service Commission says their code-share deal is effectively a monopoly and won’t be allowed to continue beyond its existing five year timeline.

Wrapping up

Echo Entertainment has made it clear that if James Packer wants to take them in order to secure its casino licence, he should put a takeover premium on the table rather than trying to adopt some of the tactics of Kerry Stokes. However, it’s always worth taking out some insurance and speculation is doing the rounds that Echo is looking regionally to try to draw out another party to force Packer into paying more.

Woolworths chief executive Grant O’Brien is playing the game of semantics when it comes to Dick Smith Electronics, saying that the business is not a "failure” for the supermarket giant. Perhaps a more appropriate word is "disappointment,” given that it’s in the same "review” stage that NAB is in with its UK operations. It’s not a failure; we just probably don’t want it anymore.

Cape Lambert and Tony Sage haven’t wasted any time putting their own touches on Chameleon Mining after taking 15 per cent instead of fees owed to management. Sage is now a Chameleon executive director, and while Ben Elias will stay on as chairman, Anthony Karam, James Arkoudis and Jason Bontempo will be consultants instead of directors from now on.

And finally, Leighton Contractors looks set to unearth a fantastic contract with Rio Tinto for its iron ore expansion in the Pilbara with a five-year framework agreement for earthworks projects and structural, mechanical and piping projects.

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