BREAKFAST DEALS: Goodbye Rio

Chinalco might sever ties with 'dishonourable woman' Rio Tinto once and for all. Elsewhere, Telstra cans a bond sale and AXA SA says it hopes to complete its AXA Asia Pacific joint bid 'one day or the other.'

Rio Tinto

Will Chinalco dump the dishonourable woman once and for all? Rumours the Chinese aluminium giant is mulling a sell out or sell down of its 9 per cent stake in dual-listed Rio Tinto have put pressure on Rio's London-listed shares. A move would capitalise on the recent rise in the miner's share price since Chinalco took 12 per cent stake in Rio TInto Plc in February 2008, and cap a tumultuous couple of years for the two companies. Rio raised Chinalco's ire earlier this year by dumping a $US19.5 billion capital injection offer in favour of a last-minute iron ore joint venture with BHP and a $US15 billion rights issue issue. In other Rio news, a deal could be in the offing with iron ore junior Iron Ore Holdings, which is 52 per cent owned by media mogul Kerry Stokes. Rio and Iron Ore Holdings has signed an exclusive negotiating agreement which could see IOH sell all or part of its Iron Valley resources. According to The Australian, the six-month exclusivity agreement is designed to ensure no other company can bid for the assets.

Telstra Corp

Telstra has dumped plans for a $500 million bond sale amid regulatory uncertainty and reportedly failing to reach an agreement over the terms of the securities. Investors are said to have baulked at the offered price, with some potential bondholders wanting the 10-year debt to offer compensation should the telco experience a credit rating downgrade. Initial price guidance also did not correlate with expectations of 180 basis points over the swap rate. The government's plans to separate Telstra's retail and network functions or deny it future access to wireless spectrum, as well as the commercial threat of the national broadband network added to investor uncertainty.

AXA Asia Pacific

French insurer AXA SA says it hopes to get its joint takeover proposal for AXA Asia Pacific through "one day or the other”. Chief executive Henri de Castries has reportedly told investors in Paris that AXA SA wants to "change gear” by increasing its footprint in emerging markets. AXA, which owns more than 50 per cent AXA Asia Pacific, has teamed up with fund manager AMP to divide up the Melbourne-based company. Under the proposed deal, AMP would take over AXA Asia Pacific's local operations, while AXA SA would buy the Asian business for $7.7 billion.

BHP Billiton

Bids for BHP Billiton's mothballed Ravensthorpe nickel mine are set to close and $500 million is believed to be in the ballpark. A source has told Bloomberg at least four bids are expected, with the Andrew Forrest-backed Posiedon Nickel expected to be among the interested parties. Minara Resources is looking at its options while Chinese nickel giant Jinchuan Group is not participating. Other interested parties are expected to be China Metallurgical Group Corp and First Quantum Minerals of Canada. BHP says it expects to make an announcement by the end of the year.

Suncorp-Metway

The market seemed to appreciate the 'steady as she goes' tone of Suncorp-Metway's market update yesterday, with new chief executive Patrick Snowball saying its underlying businesses are sound and there is no need for transformational change. The bank and insurance company says non-core assets sales will continue – it sold real estate group Hooker Corp for $82 million last month – but attempted to stamp out talk on the sale of its banking division, saying continued speculation has the potential to threaten its strategy. Snowball also reported significant reserves of support, particularly in Queensland. Suncorp – which had a Tier 1 capital ratio of 11.28 per cent as at September, and reported pristine asset quality within its core banking unit – is nonetheless rumoured to be announcing an insurance business restructure shortly.

JC Flowers

The UK financial sector is in focus at the moment, with Lloyds Banking Group announcing a record £13.5 rights offer – priced at a near-60 per cent discount – and National Australia Bank chief Cameron Clyne saying he is looking to either expand in or exit the continent. David Morgan, the former chief of Westpac Banking Corp, is making positive sounds about the UK banking system, saying divestments from Lloyds and the Royal Bank of Scotland present clear opportunities for new players. "It's actually in a distressed financial sector that you do get opportunities that you don't get in more settled times,” Morgan told Business Spectator. And 'distressed' is an apt description: it was revealed this week that RBS and HBOS were secretly propped up with £62 billion of emergency government aid during the peak of the GFC. Morgan, who announced his departure from the BHP Billiton board to become managing director for the European and Asia Pacific divisions of private equity firm JC Flowers, was also upbeat on M&A activity for the year ahead, and opportunities presented in the Asia Pacific by the pullback of overseas lenders.

Premier Investments, Breville, GUD Holdings

Premier Investments chairman Solomon Lew has cooled suggestions he is going to make a rival offer for kitchen and personal care appliance company Breville, at least any time soon. Lew said yesterday Premier "at this time” was not intending to make a bid for Breville, adding it intended to wait for all relevant information before making a decision. Breville is battling a takeover offer from GUD Holdings, the owner of Sunbeam appliances and maker of automotive, water and security products, saying the 1-for-4 offer undervalues it. GUD has a 19 per cent stake in Breville and says support from institutional investors, including fund manager Perpetual, has given it a starting position of more than 47 per cent. Solomon Lew Custodians – which includes Premier and family interests associated with Lew – holds more than 30 per cent of Breville. Retail investors account for about 20 per cent of the register. As noted yesterday, Premier has no net debt and substantial cash reserve, placing it in a strong position relative to other potential buyers of retail-related assets in Australia and elsewhere at this time. But as Stephen Bartholomeusz has suggested, while Lew probably can't stop the GUD offer getting over the line, a minority shareholding position could make life difficult for GUD. Lew also has a history of bargain hunting, suggesting he is unlikely to pay over the odds for Breville. Premier Investments last year fought hard to get its hands on Just Group. The takeover changed the listed cash box into the owner-operator of clothing brands such as Just Jeans, Peter Alexander and Portmans.

Wrapping up

Iron ore explorer Gindalbie Metals says a $1.2 billion loan accord with China Development Bank Corp could be done and dusted in early 2010. Gindalbie has told Bloomberg the loan terms were "very competitive”, and first production at its Karara mine and plant is due in the middle of 2011. China's Anshan Iron and Steel Group owns 36 per cent of Gindalbie. Oil and gas explorer Molopo Energy is planning to list its Canadian assets on the Toronto Stock Exchange next year, saying its Canadian assets – the Spearfish oil play, the Bakken oil play and Quebec Shale Gas – offer short-term reserve and production growth from oil and long-term exposure to natural gas. Molopo Energy recently sold its non-operating interest in the Shanxi Province to Fortune Oil for $US6 million. And surfwear retailer Billabong bought US online boardsports retailer Swell.com for an undisclosed price.