BREAKFAST DEALS: GrainCorp inspection

GrainCorp appoints an independent expert to scrutinise Archer Daniels Midland's bid, while the timing of Brockman's Fortescue play seems no coincidence.

GrainCorp has named the independent expert that will be in charge of determining whether Archer Daniels Midland’s $3 billion offer is ‘fair and reasonable’. Brockman Resources has sought rail access from Fortescue Metals Group, which says a lot about the third force’s infrastructure stake sale and the dwindling chances of a Pilbara rail line for the little guys. Meanwhile, the New Zealand government is looking at an even bigger float than Mighty River Power and Nine Entertainment wonders whether to let the next cricket rights go through to the keeper.

GrainCorp, Archer Daniels Midland

GrainCorp has appointed Grant Samuel as its independent expert to look at the $3 billion takeover offer from US giant Archer Daniels Midland.

Chief executive Alison Watkins made the announcement as part of yesterday’s interim results, which featured a 34 per cent slide in net profit due to grain harvests coming off their peaks and costs incurred as a result of the ADM bid.

The board of the Australian grains handler has recommended that shareholders accept the $13.20 proposal, subject to the expert’s assessment – unless of course a better deal comes along.

Watkins wouldn’t be drawn on whether another party had been forthcoming. One would assume that a posse of Chinese investors have shown some interest – at least putting in a phone call for agribusiness assets that are so strategic – but couldn’t see a way through.

It’s easy to see how that happened. From the get-go, ADM stood on just under 20 per cent of the register. If a rival bidder emerged, they’d have to contend with a competitor that had a formidable negotiating position and a strong interest not to relent.

The only weakness with that strategy is it leaves the suitor stuck with a big stake if the target company manages to resist its overtures.

Remember DuluxGroup’s tilt at Alesco Corporation?

Brockman Resources, Fortescue Metals Group

Brockman Resources is hoping to gain access to Fortescue Metals Group’s rail infrastructure, which should be the final note on the independent Pilbara rail project idea.

The miner has applied for access to below-rail infrastructure owned by Fortescue Metals under The Pilbara Infrastructure, via Western Australia’s Railways (Access) Code. That’s the same code Fortescue Metals used, unsuccessfully, to get access to the infrastructure of BHP Billiton and Rio Tinto.

If you want to know about the implications of Brockman’s application on Fortescue’s sale process for a stake in its rail and port infrastructure, read Business Spectator’s Stephen Bartholomeusz. On this issue, it closes the book.

What we can examine here is what it means for Aurizon’s feasibility study into a rail line for smaller players.

Bartholomeusz argues that the timing of Brockman’s application is probably no coincidence given that the ownership structure of The Pilbara Infrastructure looks like it’s about to change.

But it also reveals that messing with Fortescue is a better way for Brockman to spend its time than waiting for a study on an independent railway line to be completed. It’s not going to happen.

Atlas Iron is apparently in pretty close talks to Fortescue about access, and with Brockman’s application the two leading mid-tier iron ore miners for the Aurizon proposal are looking for other options.

Meridian Energy

Our trans-Tasman neighbours are whipping us again in the IPO stakes.

As part of yesterday’s Kiwi budget, New Zealand Finance Minister Bill English said as much as 49 per cent of major generator Meridian Energy would be floated.

The government floated almost half of Mighty River Power earlier this month. That raised $NZ1.7 billion ($1.4 billion), but Meridian will be bigger.

New Zealand Prime Minister John Key has pledged to raise between $NZ5 billion and $NZ7 billion through privatisations to help out the country’s budget back into surplus.

But the success of the Mighty River Power float is what gives Key the power to meet those targets.

As we’re experiencing in Australia, without a significant IPO to confirm the market’s appetite for a float, no one wants to be the one to fire the starter’s gun for fear of shooting themselves in the foot.

With Mighty River Power away, New Zealand is experiencing no such problems.

Isn’t that right, bro?

Nine Entertainment, Cricket Australia

We might be only a third of the way through the AFL and NRL seasons, but cricket lovers will be wondering whether the sport that has called Nine Network its home for more than 30 years will be heading elsewhere come summertime.

The Australian Financial Review understands that Nine Entertainment chief executive David Gyngell will be using his trip to preview upcoming shows form the US networks in Los Angeles to touch base with his company’s hedge fund owners.

The newspaper also understands that Gyngell believes the $500 million offer from Ten Network for the next set of Cricket Australia broadcasting rights is “pricey”.

Cricket Australia desperately wants to capture the attention of the next generation of sports lovers, which is rather difficult when the network’s brand is strongly linked to commentators hailing from a much older age bracket.

At the same time, Ten Network would be acutely aware that it can’t wind the coverage back too severely towards younger age brackets, otherwise its risks alienating a large viewership. Plus its pitch for younger viewers might be rubbish, or over-commercialised in pursuit of returns on a big investment.

All this will be weighing on Cricket Australia’s mind as it contemplates whether to stick with its longstanding partner or throw down with a younger model.

Just as long as Seven Network’s Bruce McAvaney doesn’t call a Test Match (remember, they go for five days), Breakfast Deals will be happy.

Wrapping up

Fairfax Media believes that Etihad Airways has been snapping up shares in Virgin Australia in the past few weeks to make up the ground lost to Singapore Airlines, which was issued new shares when the Tiger Australia majority stake purchase was approved by the competition regulator.

It quickly became clear when Singapore jumped on board that Virgin boss John Borghetti had a number of masters to serve. As Business Spectator’s Stephen Bartholomeusz explains the realities of that crowded register are coming home to roost with Virgin Australia’s profit downgrade.

Meanwhile, Bank of Queensland has raised $900 million through its bond issue, almost twice what it originally announced, thanks to strong demand.

Three quarters of the 22 institutional investors were domestic, and picked up the bonds that will pay a return of about 100 basis points about the bank bill swap rate.

It’s very common for banks to dramatically increase the size of their bond issues. Almost every Australian bank bond issue has doubled in this latest spell.

And finally, grocery and hardware wholesaler Metcash has picked up an automotive parts wholesaler called Australian Truck and Auto Parts Group for $84 million.

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