BREAKFAST DEALS: Hastings collision course

The enduring tug-of-war for Hastings looks set to continue, while Sundance and Hanlong Mining move closer to striking a deal.

The takeover battle for Hastings Diversified Utilities Fund might have sparked up, again. A media report indicates that the Canadian half of Pipeline Partners Australia is looking for someone interested in taking the fight back up to APA Group. Meanwhile, Sundance Resources has finally got a deal that can be put to shareholders. Elsewhere, Billabong International shareholders have a choice to make about the company’s turnaround plan, BHP Billiton has offloaded the Yeerlirrie uranium deposit and made a Canadian uranium firm very happy in the process.

Hastings Diversified Utilities Fund, Pipeline Partners Australia, APA Group

Hastings Diversified Utilities Fund could be set to receive yet another takeover proposal towards the end of this week, after APA Group looked to have the wood on Pipeline Partners Australia with its $1.4 billion bid.

The Australian Financial Review believes that Canadian pension fund Caisse de dpt et placement du Quebc, one of the main shareholders in PPA, is hunting for other pension funds to put a new offer to gas pipeline investor HDF.

PPA declined to exercise its right to match APA and maintain the recommendation from HDF’s independent directors last week, which appears to put a bullet in the chances of another offer.

The reason for that conclusion was, in order to snatch the board recommendation back off APA, PPA would have to surpass the APA bid, rather than just match it.

There was a report indicating that a source close to the process expected PPA to match APA, but it didn’t happen.

Now we might have an insight as to why that report emerged. If this morning’s AFR report turns out to be correct, it could be that CDPQ was keen for PPA to keep bidding but fellow owner Utilities Fund of Australia couldn’t go with them.

Sundance Resources, China Sichuan Hanlong Mining

Iron ore hopeful Sundance Resources has thrown its weight behind a scheme-of-arrangement with China Sichuan Hanlong Mining that will see the company go for 45 cents a share. When the pair first got together, the price was 57 cents.

The two companies have been locked in negotiations in Hong Kong over the last few days and bashed out a $1.37 billion deal that, hopefully, will get over the line.

Sundance says that after talks with shareholders, it’s willing to recommend the offer given the deterioration in the price of iron ore, but with a few conditions.

These include provisional approval from China’s National Development and Reform Commission, which has apparently already been secured, along with equity and debt funding for Hanlong.

Additionally, Sundance will receive $14 million if Hanlong seeks to further reduce its offer and is ultimately rebuffed by the shareholders.

The target’s shares jumped 7.5 per cent to 36 cents a pop in yesterday’s session, reflecting both optimism for the latest bit of news as well as ongoing scepticism that this deal will ever get done.

Billabong International

As explained in this morning’s edition of The Distillery, the turnaround plan unveiled by new Billabong International chief executive Laura Inman makes it very unlikely that TPG Capital will secure the company for $1.45 a share.

As Inman laid out her plan to usher the embattled surfwear retailer back to safe ground, the shadow of TPG’s $694 million takeover offer loomed large. But Inman was quick to stamp her authority on the company’s future.

"My role is to ensure that Billabong becomes a good company again regardless of whether TPG is in the picture or not,” she told investors.

Inman called for patience from the register, as her plan will take four years to execute. The question is whether the register has been sufficiently persuaded by the strategy to sit tight for that period of time.

The spectre of writedowns on a balance sheet that isn’t that strong to begin with will ensure that if TPG emerges from due diligence with an offer that gets rejected, Billabong’s ongoing weakness will attract the attention of suitors.

One only needs to remember Spotless Group, which was also in the middle of a turnaround plan when suitors came knocking.

Spirited Spotless chairman Peter Smedley managed to defend the company against a takeover bid by private equity player Blackstone Group. But the company ultimately fell to Pacific Equity Partners a year later following a prolonged and intriguing takeover battle.

The Spotless purchase serves as a reminder to executives and directors banking on a company comeback that opportunistic buyers will always be a threat if they believe they can exploit a frustrated shareholder register.

One complicating factor for Billabong is that online competitors are showing up traditional retailers. Inman is very conscious of this.

The advantage Billabong has over Spotless is institutions looking to cash out don’t dominate its register. That’s what gave PEP an inside line.

Additionally, Billabong has its own impassioned defender – founder Gordon Merchant.

BHP Billiton, Cameco

In hindsight, it’s quite logical that BHP Billiton offloaded the Yeerlirrie uranium deposit in the wake of the Olympic Dam decision.

As Business Spectator’s Stephen Bartholomeusz explains, chief executive Marius Kloppers has said the only real reason BHP was in uranium was precisely because of Olympic Dam. Without it, the departure of Yeerlirrie is completely appropriate as uranium lacks the ‘BHP scalability’.

BHP will continue to sell uranium, but not from any full owned asset. Mostly, it’ll come as a ‘bonus’ when collected unintentionally at it’s other large operations.

Canada’s Cameco has picked up the West Australian uranium deposit for $US430 million, providing that it received approval from the Australian Foreign Investment Review Board and the state government.

The state’s Premier Colin Barnett should be a walk in the park. Barnett took BHP to task earlier this year over it’s lack of commitment on the Yeerlirrie project. Seeing the site transferred to someone else, anyone else, willing to develop it will be welcome news.

It’s also a welcome win for Cameco over a big Australian operator. The Canadians were out-muscled in their own backyard by Rio Tinto late last year over Hathor Exploration, which owns the enticing Roughrider uranium deposit. Rio won with a bid of $C654 million ($642 million).

Wrapping up

Troubled retirement operator FKP Group is in a trading halt ahead of a $200 million capital raising.

The Australian reports that Goldman Sachs has been appointed to run the raising, which will be announced along with the company’s results this morning.

Elsewhere, Mining services company Ausdrill has picked up the Best Tractor Parts Group – we love simple company names at Breakfast Deals – for $165 million.

Ausdrill managing director Ron Sayers told investors the deal is a logical one for the company, with new revenue streams and a fleet expansion.

Meanwhile, printing company PMP is looking to industrial developers to purchase four facilities across the country for about $75 million, to then be leased back to the company.

CBRE has picked up the contract to sell the properties with the leaseback deals to last between five and 12 years.

And in publishing, Morgan Stanley is still selling the idea of a Fairfax Media breakup.

The Australian Financial Review, a Fairfax publication, brings word that the investment bank now sees value in the real estate business Domain. It’s yet another angle to a potential split deal.


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