BREAKFAST DEALS: Krafty catch

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Kraft has finally got its hands on Cadbury through a sweetened £11.9 billion offer. Elsewhere, BHP enters talks with ArcelorMittal.

BHP Billiton

As investors await quarterly production figures and mull the possibility of a London-focused share buyback for cashed-up BHP Billiton, the global miner has announced talks with India's ArcelorMittal regarding combining West African iron ore interests. BHP says the preliminary talks, expected to take a few months, are aimed at developing a substantial iron ore business in Liberia and Guinea. For BHP, the benefits of a tie-up are said to be the ability to ship ore from Guinea through the Liberian coast. (Rio Tinto's Simandou project in Guinea has been no picnic). Elsewhere in BHP news, the Sydney Morning Herald is reporting that the China Iron & Steel Association is believed two months ago to have delivered an ultimatum to the major iron ore miners – BHP, Rio and Brazil's Vale – that it will only accept a new iron ore contract price if it receives a "China” discount relative to its Asian neighbours. An interesting development, seeing talks collapsed last year upon the very same request.

Cadbury, Kraft

In a deal that will create the world's biggest confectioner, Kraft has finally got its hands on Cadbury through a sweetened £11.9 billion offer. Under the revised proposal, the US giant will pay 840 pence per share, including 500 pence in cash and the rest in stock, plus a previously announced dividend of 10 pence per share. The merger between Cadbury, the world's second-largest confectionary company, and Kraft, the second-largest snacks group, follows months of to-ing and fro-ing between the companies, with Cadbury at one point labelling Kraft's offer "derisory” and describing its suitor as an "unfocused conglomerate”. No longer: the new proposal represents good value for its shareholders, Britain's Cadbury says, while Kraft says it will deliver at least $US675 million in cost savings annually, and grant it the number one position in emerging markets. The deal has been taken as a good outcome for Kraft, with well-regarded food analyst Andrew Wood of US broker Sanford Bernstein saying he believed many investors would believe Kraft had acquired a jewel of a business at a very cheap price, and noting that the pricing of 18 times 2010 earnings per share is the lowest multiple of any major M&A deal in the global food space in more than a decade, for global leadership of the confectionary sector no less. Cadbury's second largest shareholder, Legal & General, also says it is disappointed the Cadbury board has recommended the offer. A counterbid by US confectioner Hershey or Italy's Ferrero is now considered unlikely. Kraft was advised by Lazard, Centerview Partners, Citigroup and Deutsche Bank; Cadbury by Goldman Sachs, Morgan Stanley and UBS.

Japan Airlines, Tiger Airways, Hong Kong Aviation Company

While Tiger Airways' IPO pleasantly surprised, Japan has seen its fourth-largest bankruptcy, with debt-laden Japan Airlines falling into bankruptcy protection. On the cards now are job cuts, a board and management restructure, route reductions and the replacement of older planes – good news for manufacturers. Despite the national carrier receiving a number of government bailouts over the past decade, the airline collapsed under the weight of its debt load, said in September to be ¥2.3trn ($27.3 billion). Still, JAL – the biggest airline by revenue in Asia – will receive almost ¥1 trillion in support from the state-backed Enterprise Turnaround Initiative Corp of Japan, and debt worth at least ¥730 billion will be forgiven by its lenders. Elsewhere in aviation, Hong Kong Aviation Company, a consortium led by China's HNA Group and Bravia Capital Partners of the US , has ambitions to become a worldwide name and business, and has told the AFR it is looking at Australia's ship leasing, ports and vineyards. It recently bought Allco Finance Group's aviation leasing business, valued at around $3 billion.

Paladin Energy, Cameco

Elsewhere in mining and international investments , RBS has tipped that uranium producer Paladin Energy might become a target of Canadian uranium giant Cameco. Analyst Lyndon Fagan says Paladin's weakened share price following last October's production downgrade might provide an opportunity for the cashed-up Cameco, although a premium of 30 per cent would likely be required, according to Bloomberg. This follows comments late last year by Cameco chief Jerry Grandey that it would consider mining asset buys and considered Paladin attractive. Paladin, which is focused on Africa and Australia and raised more than $400 million last year, has itself flagged possible acquisitions.

OZ Minerals

Copper and gold group OZ Minerals will pay $3.7 million to hold on to its 13 per cent stake in IMX Resources, as the junior explorer proceeds with a $47 million deal with Hong Kong's Taifeng Yuanchuang International, a subsidiary of the privately held Sichuan Taifeng Group. As part of the deal, yet to be approved by the FIRB, Taifeng will take a near-20 per cent stake in IMF, and 50 per cent stake in the company's Cairn Hill magnetite iron ore, copper and gold project, which is due to start producing mid-year. OZ is no stranger to Chinese investment, with the bulk of its assets sold to China Minmetals Nonferrous Metals.

Wrapping up

Merrill Lynch reckons AGL Energy, a favourite in the NSW power privatisation process alongside Origin Energy, could raise between $800 million and $2.5 billion this year to get its hands on some retailers and/or generation trading assets. More consolidation in the gold sector has been tipped by the managing director of Kingsgate Consolidated, which just released a well-received quarterly report. Gavin Thomas says the best defence to hostile offers is a strong share price, amid strong consolidation in Asia. For its part, Kingsgate, which boasts BlackRock Investment Management as a substantial shareholder, aims to become a mid-tier gold company. It says it is awaiting word from the Thai Board of Investment regarding an expansion of its Chatree operation in the country, the AFR reports. Building products and sugar company CSR will head to the courts on January 29 regarding its asbestos liabilities and reiterated that the planned demerger of its sugar and renewable business is the best path, irrespective of warnings China's Bright Food might lose interest if it fails to engage. Meanwhile, IT services company and takeover target Powerlan has been told to delay a rights issue and is awaiting a ruling from the Takeovers Panel, after receiving a takeover offer from its former boss. The target has denied an accusation from its suitor, Alpha Growth International, that the 4-for-1 renounceable rights issue is designed to thwart its offer.