BREAKFAST DEALS: Goldman's power play

Goldman Sachs wins a coveted role in the privatisation of NSW's power assets, while BlueScope receives a valuable endorsement.

Goldman Sachs is finishing off a disappointing year for investment banks on a high note by securing the advisory role for the NSW government’s electricity privatisation. BlueScope Steel has shown the market how it’s done with a series of deals culminating in some positive endorsements from analysts. Meanwhile, Talison Minerals have a difficult decision ahead of them, Horizon Oil is calling big energy firms interested in PNG gas exports to the table and Nathan Tinkler is back in the swing of making deals, although this is a small one.

NSW electricity privatisation, Goldman Sachs

Goldman Sachs apparently beat out three other heavyweights for perhaps the most coveted advisory role for an investment bank in Australia for 2012.

NSW Treasurer Mike Baird finally gave the advisory gig for the state’s $3 billion privatisation of its electricity generators yesterday.

The Australian Financial Review understands Goldman was selected over Citigroup, Credit Suisse and UBS from a short-list that was examined last week.

Legal firm Baker & McKenzie and accounting giant KPMG are also helping out.

Every survey on the Australian deals market points to a thoroughly disappointing 2012, which increased the focus on the NSW privatisation advisory role. Stories about the investment banks lining up for the contract have been circling for six months.

BlueScope Steel

The tempo of Australia’s steelmaking sector has certainly picked up a bit in recent months. BlueScope Steel shares spiked 11.1 per cent yesterday to 50 cents. The stock is up a staggering 50 per cent in the last 6 months.

The reason for yesterday’s share price surge was an endorsement from Bank of America Merrill Lynch and CLSA analysts for the company’s strategy.

The company’s Global Building Solutions business, as well as its exposure to China and the recovering US market have given analysts more confidence in the company’s earnings potential going forward.

It’s easy to forget that BlueScope underwent a $600 million capital raising a year and a day ago, which was a 34 per cent discount to the previous trading price.

Since then, BlueScope has secured a $1.36 billion joint venture deal with Japanese giant Nippon Steel for its North American operations.

And perhaps more tellingly, the steelmaker axed plans for a $US300 million ($289.9 million) corporate bond issue because US markets were becoming too volatile to secure a good price.

Twelves months ago, BlueScope had to sacrifice its share price in order to fix its balance sheet. Now the company has the breathing room to turn down unflattering funding deals and the share price has pretty much recovered its ground.

Talison Minerals, Rockwood Holdings, Chengdu Tianqi Industry Group of China

Shareholders in lithium ore producer Talison Minerals will have quite a bit to think about over the weekend as a Chinese suitor raises serious questions about a proposal from a US company.

Talison is an Australian-based company, but it’s listed on the Toronto Stock Exchange.

It’s shareholders are due to meet next week in Perth over a $C6.50 cash offer from Rockwood Holdings, valuing the company at $C724 million ($700.2 million).

At the time the offer was announced in August, Rockwood was offering a 60 per cent premium to the previous share price and it looked like a done deal.

The problem is that since the proposal was announced, Chengdu Tianqi Industry Group of China has picked up a 14.9 per cent stake, added another 1.1 per cent and lodged a formal scheme of arrangement to acquire Talison for $C7.15 a share.

Given that Talison is the world’s largest producer of spodumene, a valued form of lithium ore, and Tianqi is a hard rock lithium giant, the extra premium makes a lot of sense.

Crucially, the caveat that usually hangs over these Chinese deals, the Australian Foreign Investment Review Board (FIRB), mightn’t be a problem here.

According to a report from Bloomberg earlier this week, academics believe that Tianqi will be considered a private firm by FIRB, not the kind of state-owned enterprise that the regulator usually has concerns for.

Horizon Oil

Sydney’s Horizon Oil has opened the doors to big energy players looking for a way into the Papua New Guinea gas export markets.

At the company’s annual general meeting yesterday, chairman Fraser Ainsworth said the company is looking to sell up to half its PNG interests after some encouraging drilling results.

"We believe Horizon Oil has a commanding and material position in the liquids-rich ‘sweet spot’ of the Papuan foreland basin and we have had strong interest in the sale from substantive LNG industry players,” said Ainsworth.

"A successful sale, reflecting the board’s firm view of the material future value of the PNG interests, will not only achieve the strategic requirements of portfolio balance and certainty of funding of the future development program…but will serve to crystallise value from the investment made to date in PNG and the success obtained.”

As everyone knows, PNG has its problems. But the south Asian country is ideally positioned for exports to big regional consumers from a shipping point of view.

Woolworths, SCA Property

The board and management of supermarket giant Woolworths received a pair of overwhelming endorsements from its register at yesterday’s annual general meeting.

Work has already begun on the up to $506 million equity raising for SCA Property Group, after 99 per cent of Woolworths shareholders voted in favour of the $1.4 billion spinoff.

Citi is handling the raising, which is expected to receive very strong support from shareholders.

One remarkable thing about yesterday’s meeting that went largely unmentioned was the strong support the company’s remuneration report received.

A mere four per cent of shareholders objected to the executive pay plan.

Many big Australian corporates have copped a ‘strike’ for their remuneration reports, received a large protest vote or nipped it in the bud by cutting bonuses in advance.

Woolworths operates in a sluggish retail environment against a rival that’s on the fast track back from a period of mismanagement, which has slightly outperformed its larger competitor on a share price basis. But the register appears to be pretty satisfied with the big dog.

Wrapping up

Young mining tycoon Nathan Tinkler appears to have his dealmaking pants back on after striking an agreement to keep the employees of Patinack Farm in their jobs.

The Federal Court in Adelaide had ordered Patinack Farm Administration to be wound up, but a spokesperson for the former electrician said earlier that the failure to pay Workcover SA was an administrative error and Tinkler appears to have kept administrators from doing their thing for the time being.

And finally, to end the week the Australian Competition and Consumer Commission has reportedly given its approval to the local component of Nestle’s $US11.8 billion ($11.3 billion) merger with Pfizer Nutrition.

The pertinent issue at hand is the Australian infant formula market, which Nestle will now control the majority of.

The Australian Financial Review reports that the consumer watchdog has approved the deal, but slapped a few strict conditions on the company.