BREAKFAST DEALS: Leighton escape

Leighton takes a step towards restoring its reputation, while banks support the Qantas split.

Leighton Holdings has many hurdles to clear before its once formidable reputation is restored. But chief executive Hamish Tyrwhitt has taken a crucial first step in that quest by flagging the company’s troublesome Al Habtoor joint venture for an eventual exit or selldown. Similarly, Qantas Airways boss Alan Joyce has lined the airline up for a structure more befitting of the challenges it faces. Elsewhere, traders are reportedly betting against a Crown bid for Echo, at least in the near term, BHP Billiton has left the door open for a TEMCO exit and the Financial Services Council has weighed in on the ASX capital raising reforms debate.

Leighton Holdings, Al Habtoor Leighton

Leighton Holdings chief executive Hamish Tyrwhitt is positioning for an exit or a selldown of the construction giant’s troublesome Al Habtoor Leighton joint venture in the Middle East. Leighton owns 45 per cent of the vehicle, with the remaining 55 per cent held by United Arab Emirates player Al Habtoor. Leighton shareholders were told yesterday that joint venture, based in Dubai, would be "IPO ready by 2016”.

The move is part of an attempt by Leighton management to win back the confidence of its shareholders after a series of cost blowouts and management scandals helped push the company’s share price down 42 per cent since the beginning of 2011. The IPO plan is still a long way off, so Leighton will have to make sure that as few headaches emerge from Al Habtoor Leighton as possible in the meantime. On top of Leighton’s Middle East plans, the construction firm is renegotiating some consultancy agreements with former boss Wal King.

Qantas Airways

It’s a matter of what Qantas Airways does after the management restructure rather than the restructure itself. Qantas boss Alan Joyce has split the company’s domestic and international operations into separate businesses, a decision that will help highlight just how hard the international airline market is.

Goldman Sachs, Credit Suisse and Macquarie all threw their support behind the move because it will allow the market to more easily conduct ‘sum of its parts’ valuations, which will support the share price. Goldman went further to suggest that this new organisational structure would be the trigger for more organisational changes and strategic decisions. Business Spectator’s Stephen Bartholomeusz explains that the new structure is actually quite conventional – as opposed to the one the airline is leaving behind.

Qantas has recently improved relations with Middle Eastern carrier Emirates, raising hopes of the pair might look at a code-sharing arrangement. This would get rid of Qantas’ network issues in Europe. But the biggest carrot for Qantas is to bed down some kind of deal to set up a premium Asian carrier.

Echo Entertainment, Crown

Echo Entertainment is reportedly attracting an increasing number of short sellers as traders doubt that a transaction with Crown is likely in the near term. According to The Australian, analysts at RBS have found that short positions in Echo have been building since February.

This is certainly counterintuitive to the undercurrent of the story, which is that billionaire James Packer is considering an exit from Consolidated Media Holdings, which would give him enough cash to bid for Echo with Crown. But it mightn’t be so contrarian. Not only is a bid for Echo not a certainty, Packer has recently made his admiration for fellow billionaire Kerry Stokes public. Specifically, Packer has praised Stokes for his ability to win companies without paying a premium. Ergo, short Echo.

BHP Billiton

Mining giant BHP Billiton has left the door open to exiting its TEMCO manganese allow plant in Northern Tasmania. BHP wouldn’t rule out the option despite job reductions and a new power deal with the state government’s Hydro Tasmania helping to return the site the profitability.

BHP owns 60 per cent of the restarted plant, with Anglo American holding the other 40 per cent. The question is whether BHP continues to see TEMCO as being part of its core portfolio. Given its more selective investment intentions, as outlined by chief executive Marius Kloppers and chairman Jacques Nasser, the likelihood that BHP will exit TEMCO at some point appears a little more likely.

ASX capital raising reforms

The ASX has come under fire by the wealth management lobby group for its plans to raise the limit to which smaller companies can raise capital via share issues without shareholder approval. The Financial Services Council, led by former NSW opposition leader John Brogden, lodged a submission on the proposal earlier this week where it complained that the plans would infringe on shareholder rights. At present, small to medium companies worth up to $300 million can issue shares worth up to 15 per cent of their register without telling their shareholders. The ASX wants to kick that up to 25 per cent.

Such a move undoubtedly serves the market operator's bottom line. But the question is whether the curbing of shareholder rights for these smaller companies outweighs the obvious benefit of access to additional capital that Australia’s smaller companies desperately need.

Wrapping up

It appears that Gunns can’t take a trick without a ‘but’. The timber company has been taken to the Supreme Court over the sale of its Heyfield plant. Annoyingly, Gunns is in court at the request of the recipient of Heyfield, Hermal Group.

In banking, National Australia Bank shareholders would love nothing more than an exit from the UK market on respectable terms. Given that valuations are at 60 per cent of book value, that isn’t going to happen. But shareholders can at least take heart at comments from chief executive Cameron Clyne, who says he is absolutely uninterested in more takeovers.

Elsehwere, speculators who have zeroed in on Coalworks might have gotten ahead of themselves. The Whitehaven Coal target is trading at a 1.5 per cent premium to the $1.00 a share takeover price, but The Australian Financial Review understands that the two companies haven’t even sat down to discuss a higher offer.

And finally, mining billionaire Gina Rinehart might curse a deal her father Lang Hancock made in 1959, because it’s going to cost her dearly today. Hancock was backed by Perth billionaire Stan Perron – who just did a $690 million deal with Centro – to the tune of £500 back at the end of the decade Scottish comedian Billy Connolly refers to with the colour beige. That deal has now secured Perron 15 per cent of entitlements from certain Hancock Prospecting mines, which will be worth possibly tens of millions.