BREAKFAST DEALS: Goldman eye

Goldman Sachs may see more in Becton than a chunk of debt, while Discovery Metals finds more trouble.

Becton Property Group is tipped to be getting to know its new lender, Goldman Sachs, which is thought to have an eye on its retirement portfolio. Discovery Metals has bitten into another production problem at its flagship Botswana asset as Chinese private equity player Cathay Fortune lurks. Meanwhile, Commonwealth Bank’s tilt at Aussie Home Loans is raising fresh independence questions, Genworth Australia has picked up a familiar face as IPO hopes are rekindled and Ten Network’s Lachlan Murdoch is urging retail shareholders to get aboard the capital raising.

Becton Property Group, Goldman Sachs

The once formidable Becton Property Group is due to update the market on the state of its debt by the start of trading tomorrow after going into a trading halt on Friday.

Investment banking giant Goldman Sachs has picked up $200 million worth of Becton debt from Lloyd’s for just $100 million.

The scale of such a savage discount and its implications were not quite reflected in Becton’s statement to the market on Friday.

"The trading halt is being sought in relation to incomplete information which has come to BEC’s attention regarding the possible sale by BEC’s corporate debt provider of the debt owed by BEC to that debt provider,” wrote Becton.

Becton was once a behemoth of the property industry, but has slipped from a market cap of $4 billion to just $3.5 million. It has around $300 million of assets on its books and about just as much in debt.

Goldman doesn’t take things lightly in debt negotiations, which is something we all discovered in 2012 during the Nine Entertainment negotiations – although, Goldman was just a mezzanine lender in that play and got pushed around by senior hedge fund lenders.

The key for Becton now is to get a grip on what Goldman is after from the purchase. Last year, the investment bank was thwarted in its efforts to pick up the debt of Becton’s retirement portfolio by a new financing agreement.

This comes a few months after corporate raider Darren Olney-Fraser was effectively blocked by Lloyd’s from ascending to the Becton board by Lloyd’s, which threatened to call in the construction company’s debt if he became a director.

While the arrival of Goldman would remove one obstacle for Olney-Fraser, it’s not exactly the investment bank’s first priority to see him secure a board seat.

Heading into 2013, hopes were rising that the listed property sector could see resurgence in interest, thanks to the attention that GPT Group, and apparently Mirvac Group, are giving Australand.

But the troubles at Becton offer a potent reminder that many of the construction companies that build many of the assets for these vehicles are in a bad way.

Still, rival construction company Lend Lease has picked up about $264 million worth of work, but that’s overseas.

Lend Lease has announced a £170 million contract with Land Securities to build two new buildings on the former Kings Gate House in central London.

And just while we’ve mentioned Olney-Fraser, another one of his targets has shown certain resilience to his boardroom aspirations.

Mariner has tilted recently at skatewear company Globe International, which has been forced into a board spill thanks to two successive rejections of the company’s remuneration report. Retail kingpin Solomon Lew and fund manager David Williams greatly helped those rejections with their stakes.

Olney-Fraser has previously hoped to have Mariner chairman Don Christie elevated to the Globe board, but he hasn’t been nominated this time around, apparently missing the cut-off date.

Discovery Metals, Cathay Fortune

Africa-focussed miner Discovery Metals is coming under yet more pressure from Chinese private equity suitor Cathay Fortune after further operational problems at its flagship Boseto project in Botswana.

Discovery informed the market that part of the Boseto mill had failed on Christmas Eve and that it’s aiming to restore operations within a week.

Two months prior, a portion of the wall of Boseto’s Zeta open pit mine collapsed, which Cathay tried to use as leverage to get Discovery to engage with its $830 million offer.

While that attempt was unsuccessful, it’s pretty easy to see how Cathay will respond.

Cathay, which is bidding in conjunction with China-Africa Development Fund, has almost 15 per cent of its target and recently extended the $1.70 a share offer until early February.

Commonwealth Bank of Australia, Aussie Home Loans

A former competition watchdog member has reportedly expressed concerns about the independence of Aussie Home Loans under Commonwealth Bank of Australia.

The John Symonds vehicle is gradually being acquired by CBA under chief executive Ian Narev, with a deal to increase its one-third stake to 80 per cent with an option to take that to 100 per cent in 2016. The deal is still subject to approval from the Australian Competition and Consumer Commission.

Professor Stephen King, a former member of the ACCC, says it will be difficult to Aussie to maintain a substantial distance from CBA.

"It would be extremely surprising if over time Aussie wasn’t under pressure to start pushing its owner’s products,” said King, according to The Australian Financial Review.

"Even though the bank today may say that is not its intention, it is very hard for any company to keep a downstream subsidiary pure when that subsidiary could essentially be promoting its competitors’ products.”

King believes that the ACCC will approve the deal in the end. But simply getting the deal past the competition watchdog is half the battle.

Narev’s challenge will be to maintain a perception that Aussie does enjoy enough independence from its incoming parent company to offer a product worth considering beyond the big four – that’s Aussie’s current appeal.

Then again, Aussie has managed to maintain its independence while having CBA as a one-third shareholder. That’s no mean feat.

This acquisition, thought to be coming in at less than $300 million, needs to be put into some perspective. CBA finished trading at a record $63.25 last week, giving it a market capitalisation of over $100 billion.

That makes CBA the tenth largest bank in the world by market cap and there are broad expectations that Narev will use some of the lender’s market power for acquisitions.

They’d almost certainly be overseas, with limited opportunities in Australia that wouldn’t fall foul of the ACCC.

You can argue that CBA is overvalued, but it’s doubtful they’re particularly concerned.

Genworth Australia

Mortgage insurance giant Genworth Financial has named a familiar face as the new chief financial officer of its Australian business as it moves back towards floating a portion of the business.

Genworth Australia boss Ellie Comerford named former St George Bank boss Paul Fegan as CIO, replacing Anne O’Driscoll who took up a job with broking company Steadfast.

Fegan is a popular and safe pair of hands for Genworth Australia, which was headed towards an $800 million IPO last year.

The spike in mortgage delinquencies, largely from the Queensland floods, and a generally touchy sharemarket provided enough disincentives for Genworth to delay a float until 2013.

Well, we’re here.

Ten Network, Nine Entertainment

While we are indeed in the new year, there are reminders aplenty of the share price pain that media industry investors copped in 2012.

Ten Network chairman Lachlan Murdoch has written to his shareholders encouraging them to participate in the broadcaster’s non-renounceable, 4-for-5, $230 million capital raising at 20 cents a share.

Last year, the company’s stock plunged 65 per cent, which was far worse than rival broadcaster Seven West Media at 48 per cent and fellow media player Fairfax Media at 29 per cent.

Ten expects to raise $63 million from the retail component of the capital raising, with 93 per cent of entitlements picked up on the institutional side.

"Most of the proceeds received from the entitlement offer will be used to repay our existing $US125 million (swapped into $210 million) US private placement facility due in March 2013, with the remaining proceeds used to fund restructuring costs and working capital for general purposes,” wrote Murdoch.

"If you choose to do nothing, your entitlement will lapse and you will receive no value for your entitlement.”

Staggeringly, it could be worse. According to documents lodged with the securities regulator Nine Entertainment executives will soon trade in a total of $3.27 million in shares under an executive remuneration plan for just $1 per person.

The losses are part of the company’s restructure plan.

Wrapping up

African-focussed iron ore hopeful Sundance Resources finished off 2012 on what appeared to be a clear signal of hope in relation to its $1.3 billion takeover offer from China Sichuan Hanlong Mining – have we heard that before?

The breakthrough came in the form of a clearance from the Republic of Congo government for the development of the Nabeba iron ore deposit. The shares spiked 16 per cent to 37 per cent on Monday last week, where they have stayed.

Sticking with mining, Minmetals Resources chief executive Andrew Michelmore is starting off 2013 as expected, with acquisitions on the mind.

The Australian quotes the former OZ Minerals boss this morning about his desire to secure another $1 billion-plus acquisition this year after securing Anvil Mining in 2012.

"Realistically you can probably only do one a year, and if we'd done another it would have stretched our people too much,” he said.

And finally, the same newspaper also reports growing speculation that Treasury Wine Estates will be picked up by a foreign buyers sometime this year as the wine glut ebbs.