BREAKFAST DEALS: Hastings tug-of-war

Pipeline Partners is rumoured to increase its bid for Hastings, again, while there may be mutiny at Nathan Tinkler's racing stud.

Hastings Diversified Utilities Fund shareholders will be licking their lips at the possibility that Pipeline Partners Australia could increase its all cash bid for the company yet again. APA Group, watch out! Meanwhile, Nathan Tinkler’s horse racing interests are even more troubled that we suspected. What does that mean for his Whitehaven Coal situation? Elsewhere, Sundance Resources is meeting with suitor Hanlong Mining in Hong Kong, QBE Insurance is still open to acquisitions under new boss John Neal and we’ve got a list of reporting companies that might have a deal or two to announce.

Hastings Diversified Utilities Fund, APA Group, Pipeline Partners Australia

The takeover battle for Hastings Diversified Utilities Fund might reach even greater heights in the next two days, if The Australian Financial Review is to be believed.

The newspaper says sources indicate that rival bidder Pipeline Partners Australia is tipped to increase its offer again.

On Friday, rival bidder APA Group raised its bid for the second time, boosting the cash component to 72 cents from 62 cents a share, on top of the 0.39 APA shares for each HDF security.

The bid is conditional on 70 per cent acceptance. But if APA reaches 90 per cent acceptance, and with it compulsory acquisition, there’s an extra 8 cents a share in there for HDF shareholders.

Based on APA’s closing share price of $4.65 on Friday, the bid values HDF at $2.60 a share, or $1.4 billion in total. It’s much higher than PPA’s $2.43 all cash offer.

PPA, a joint venture between Utilities Trust of Australia (a fund managed by HDF’s managed Hastings Funds Management) and Canadian fund manager Canada’s Caisse de dpot et placement du Qubec, has until midnight tomorrow to counter before HDF recommends APA’s offer. And PPA just might do that.

"The $2.43 tabled by PPA was not their last price. That was definitely not their last gasp and I think they could bid more,” one of the AFR’s sources says. "PPA has the recommendation and an all-cash offer and APA doesn’t. I would expect them to come back.”

The fact that APA just increased the cash component of its offer hints that it’s prepared for that eventuality. HDF’s independent directors have shown a willingness to recommend an offer from PPA that has a slightly lower headline value than APA’s, because they’re going all cash.

PPA has two days to make it happen.

Nathan Tinkler, Patinack Farm, Whitehaven Coal

Some damaging details have emerged about Nathan Tinkler’s horse racing interests that could, conversely, indicate things aren’t so desperate in relation to his Whitehaven Coal privatisation.

According to Fairfax, Tinkler’s horseracing and breeding business Patinack Farm is under serious financial stress, having failed to meet worker superannuation payments since November.

The report says workers are close to "mutiny,” with the coal dealmaker’s headline wealth failing to satisfy worker entitlements.

This follows a report from Fairfax late last week that Tinkler had sought to offload horseracing and breeding business Patinack Farm. Sheikh Fahad al-Thani – a member of the Qatari royal family and owner of Dunaden, last year’s Melbourne Cup winner – was lined up for a deal worth $200 million, 50 per cent less than the $300 million that Tinkler has pumped into it.

Last week, one impression was that Tinkler must be desperate in relation to Whitehaven if he’s willing to part with interests close to his heart.

While the news this morning is hardly good, it gives some context to Tinkler’s apparent desperation.

With the business in such apparent disrepair, it could be that Tinkler took a more practical mindset to drop his interests in horseracing, because he really believes the coal story.

The failed sale came in June, well before Tinkler’s apparent cashflow problems with his private vehicle Mulsanne Resources.

Fairfax also reports that Tinkler, having failed to convince the Sheik, is selling 350 horses in October through Magic Millions, the auction house of Harvey Norman billionaire Gerry Harvey.

It’s understood that Harvey has extended an advanced payment to Tinkler of $20 million.

Sundance Resources, China Sichuan Hanlong Mining

Africa-focused iron ore company Sundance Resources is apparently set to meet suitor China Sichuan Hanlong Mining tomorrow in Hong Kong to thrash out a deal.

According to The Australian Financial Review, sources say that Hanlong is open to changing its 45 cents proposal by "a few cents,” but it’s sweating Sundance out to see if it cracks first.

Keep an eye on this one because there’s increasingly chatter in the market that another bidder is waiting on the sidelines. No word yet on who it might be.

There’s no incentive to move until the talks between Sundance and Hanlong completely collapse. But there’s value in Sundance if China declines to take it.

Reporting season rolls on

As detailed by Business Spectator’s Shane White in The Week Ahead, the market has a busy five days ahead of it.

Amongst all the big corporates that are reporting, there are a bunch of players that should be watched closely for Wheels and Deals news.

Today, we’re kicking off with Consolidated Media Holdings, which has the coveted 25 per cent stake in Foxtel that News Limited and Seven Group Holdings billionaire Kerry Stokes is after.

Wednesday, it’s mining giant BHP Billiton. We might get some word about the fate of its diamond business.

Also, we’ve got Pacific Brands and APA Group mid-week. The former has slipped from some M&A watch lists after the preliminary discussions with Kohlberg Kravis Roberts fell through. However, the company has to do something drastic to secure its future.

As explained earlier, APA will either be staring at another improved offer from Pipeline Partners Australia for Hastings Diversified Utilities Fund, or a recommendation for the target. That is, unless PPA bid today. In that case, there might be enough time for APA to have countered…again.

On Thursday, Qantas Airlines will deliver its numbers. Chief executive Alan Joyce is certain to face questions about how the airline’s discussions with potential international partners are going.

Joining Qantas will be Fairfax Media. The media company might declare a big write-down on its publishing assets if recent speculation is on the money.

And on Friday, beloved but beleaguered Billabong International will hand down some predictably worrying figures and everyone will be wondering what the situation is with TPG Capital. And Whitehaven Coal will also be delivering its numbers. Given the story with Nathan Tinkler explained above, questions will pressed.

QBE Insurance

QBE Insurance chief executive John Neal said when he took the wheel from veteran boss Frank O’Halloran that acquisitions were still on the agenda. Just not in the big way that they were with his legendary predecessor.

Speaking to Fairfax, Neal has maintained this line, but added that he won’t be renewing the company’s run at Insurance Australia Group.

"It is a case of ‘if and when’ there's a round of consolidation in the Australian market and we would be very interested in participating in that consolidation,” Neal said.

Instead, Neal says that the insurer will be focusing more on the commercial and specialist insurance space, rather than cars and homes.

This makes quite a bit of sense given the stagnant state of the housing market and the lack of consumer demand for cars at the moment.

Wrapping up

Institutional mammoth Blackrock has reportedly taken advantage of the relative discount that Rio Tinto’s stock trades in London against Sydney.

According to The Australian, Blackrock has increased its net holdings in Rio by $300 million, but done so while increasing its London-listed shares and reducing its ASX stock.

The same newspaper also reports comments from JPMorgan analyst Stuart Jackson that Singapore’s Wilmar International wants to take Goodman Fielder.

Wilmar has indicated that it will consider reducing its 10.1 per cent if, as appears likely, Goodman sells its edible oil and fats business.

The Singaporean company has already said that it has put a proposal to Goodman, but the price was too low for the recipient (curiously, Goodman denies any of this happened).

Meanwhile, the consolidation in the Australian stockbroking sector looks like it might continue today.

According to the AFR, EL&C Baillieu and FW Holst & Co could announce a merger as early as today. The newspaper understands that a deal was agreed to in Friday.

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