BREAKFAST DEALS: IAG escape?

IAG attempts to exit the recessionary UK market, while Coalworks ups its defence against a Whitehaven takeover.

Insurance Australia Group boss Mike Wilkins will attempt to do what National Australia Bank boss Cameron Clyne couldn’t – get out of the UK. Arch-rival QBE Insurance could give the assets a once-over if the price is right, but if the price is too low, like Clyne, Wilkins might have to stay put. Elsewhere, Coalworks has decided to fight two battles at once, combining its defence against Whitehaven Coal’s takeover offer with the board spill motion from Macquarie. Meanwhile, Centro Retail Australia can finally breathe some clean air, the Rivercity Motorway clean-up is hitting some rough terrain and BHP Billiton hasn’t wasted any time reshaping its future.

Insurance Australia Group, QBE Insurance

Could QBE Insurance be the one to buy the UK division of rival Insurance Australia Group? IAG made a $1.4 billion splash the UK market at the end of 2006 when it snapped up Equity Insurance Group. It didn’t go well. The book value that’s left sits somewhere between $550 million and $600 million, much of which is goodwill. Chief executive Mike Wilkins could have jettisoned the unit when he took over in 2008, but hindsight has made many look foolish in the post-GFC era.

QBE looks set to adopt a slightly more conservative strategy under incoming chief executive John Neal, who takes over from veteran boss Frank O’Halloran in August. Acquisitions on the lower side of $500 million are what many market watchers are expecting on the horizon. Once goodwill is taken into account, the IAG business would fit this picture.

But the question, of course, is price. If Wilkins asks too much for the unit he could find himself in the exact same position that National Australia Bank boss Cameron Clyne. NAB at long last explored the possibility of ending its similarly unsuccessful tilt at the UK market by selling Clydesdale Bank and Yorkshire Bank. All they found were unconvincing bids.

Coalworks, Whitehaven Coal

Coalworks has taken things up a notch to defend itself against a $142 million takeover offer from Whitehaven Coal, its 17.3 per cent shareholder. Notes attached to an analyst presentation reiterated the contention of the board that the $1.00 a share offer from Whitehaven doesn’t recognise the growth opportunities for Coalworks, or the synergetic benefits that the suitor would collect.

But Coalworks also combined the takeover issue with an unrelated attempt by Macquarie to oust the coal company’s chairman Wayne Mitchell and managing director Andrew Firek. Macquarie wants them replaced with its nominees Anthony Ferguson and Johann Jooste-Jacobs, but Coalworks says that would result in its board being comprised of just nominees of Whitehaven and Macquarie. "A board comprising three directors each nominated by Macquarie and Whitehaven/Boardwalk is not able to independently and fairly assess the offer that has been made by Whitehaven,” Coalworks said.

Macquarie’s grievance with Coalworks comes from the decision to allocate 6 per cent of issued capital to Hong Kong’s Noble Group as part of a capital raising that diluted the investment bank’s stake. It’s been reported that Macquarie didn’t believe capital needed to be raised. This has nothing to do with the takeover, but one might argue that Coalworks has the right to conflate the issues because the timing that Macquarie choose for the board spill motion coincided with the Whitehaven-Aston Resources merger, which explicitly raised the prospect of a Coalworks takeover.

Centro Retail Australia

Centro Retail Australia has capped off a remarkable story of survival with a deal that will finally put it on the path towards recovery. Centro has sold 50 per cent stakes in three of its premium shopping centres – Perth’s Galleria, Adelaide’s Colonnades and Melbourne’s The Glen – to Perth billionaire Stan Perron for $690.4 million. The proceeds left over from the transactions fees will go towards paying down debt and refurbishing some neglected sites. Centro chief executive Steven Sewell described the deal as a "redefining event”.

Centro only announced that the assets were up for sale last month, which means Perron must have moved pretty decisively. Indeed, Sewell emphasised that Perron is a private company and pointed out that it had the "flexibility to make this compelling offer early in the transaction process”.

Rivercity Motorway

A complicated picture is emerging from car crash at Rivercity Motorway. Receivers KordaMentha hired Goldman Sachs earlier this week to run the sales process for the fallen Clem Jones Tunnel toll road operator in Queensland. The Australian Financial Review reports that while this is going on, KordaMentha has also commenced proceedings against traffic forecaster Aecom Australia. They’re seeking up to $2 billion.

The rationale, reports the newspaper, is that if Aecom had not been "negligent, "misleading” and "deceptive” – presumably in some traffic forecasts they made about the Clem Jones – investors wouldn’t have thrown $2 billion into the project. Aecom, unsurprisingly, disagrees.

BHP Billiton, Breakaway Resources

BHP Billiton chairman Jacques Nasser isn’t known for mucking around too much. Just a day after announcing that the world’s largest mining company would be reviewing its project pipeline for only the most compelling investments, BHP has walked out on a copper and silver joint venture with Breakaway Resources. Against a flat market, Breakaway’s shares dropped 3.6 per cent.

The Altia copper and silver deposit didn’t meet BHP’s evolving criteria on the basis of a disappointing "commercial and technical review,” the miner said in a statement to the market. The move follows comments from Nasser indicating that BHP was taking a much more cautious approach as metals prices come off the boil amid China’s slowdown and Europe’s blow-up. ‘‘If we can't meet our criteria in any one project, product or geography, we will redirect our capital somewhere else or we simply won’t invest at all,’’ Nasser said.

Of course, Altia is a small potato. The big question facing the miner is which of its megaprojects – Olympic Dam, the Pilbara expansion and the Jansen potash project – will be delayed.

Wrapping up

Firstly in this morning’s wrap up, a spokesperson from Aurora Oil & Gas contacted Business Spectator to clarify that the company’s capital raising is not being conducted in order to pay for the takeover offer for Eureka Energy and the additional acquisition of 6 per cent of Sugarloaf. Both are fully funded from internal sources. The capital raising is to allow for flexibility in developing the company’s Eagle Ford shale assets in Texas and for possible future acquisitions. So possibly some more news to come from Aurora.

A government report on the conduct of Echo Entertainment’s Star casino has cleared it of any wrongdoing in its investigation into claims against former general manager Sid Vaikunta. Echo chief executive Larry Mullin said the report proves allegations against the company were unfounded. So will this stop billionaire James Packer from antagonising the Echo board? In a pair of words, hell no.

And, Malaysia’s YTL Corp has won the Commonwealth Property Hotel Fund portfolio, according to The Australian Financial Review. The final size of the deal was $400 million.