BREAKFAST DEALS: Leighton remedy

Leighton Holdings looks set to unveil its third consecutive profit downgrade under the auspices of new CEO David Stewart and the construction giant may now look to an equity raising to steady the ship. Meanwhile, Lachlan Murdoch makes his first public appearance as Ten Network's interim CEO with warnings of a long road ahead, and with the Riversdale Mining deal sealed Rio Tinto will now look to engage with Tata Steel and CSN on project funding. Elsewhere, a week to forget for the NBN Co as blowout fears escalate, Equinox labels Minmetals' $6.3 billion offer inadequate, and Clive Palmer warns Swan about rejecting the SGX-ASX bid.

Leighton Holdings

The nation's biggest contractor, Leighton Holdings, looks set to announce its third consecutive profit downgrade since the departure of former boss Wal King, and the market is bracing for a hefty writedown. King's successor David Stewart now has a few things to ponder to steady the ship that has been rocked by problems with the Victorian desalination plant, Brisbane Airport Link and its Middle East joint venture. The problems were flagged by Leighton's CFO Peter Gregg in February but the fact that Leighton has requested a two-day trading halt would indicate that the fallout from the issues is spreading and requires urgent remedy. The obvious options for Stewart and Gregg are to either pursue an equity raising or get moving on its plans to sell its listed investment stakes. It could also look to take on more debt. Stewart has previously indicated a reluctance to tap the market but The Australian reports that Leighton is eyeing an equity raising of between $600 million to $800 million. Unsurprisingly Leigthon's woes are going to have a substantial impact on its major shareholder, Hochtief, which relies on the Australian giant for most of its profits. Hochtief will have a role to play in any potential capital raising by Leighton and is unlikely to be pleased about the resultant dilution of its 54 per cent stake. Leighton's current gearing levels are at 39 per cent, just within its targeted 35 to 40 per cent range, so it could raise its gearing levels to counteract the latest writedown. With regards to asset sales, the recent appointment of King as Ausdrill's deputy chairman has sparked talk that Leighton may offload its 20 per cent stake in mining and civil contractor Macmahon Holdings to Ausdrill. Then there are the stakes in mining services company Sedgman and property group Devine and The Australian reports that the three stakes are worth a combined $305 million dollars. So an equity raising may be on the cards but Stewart and Gregg may also speed up the process of selling stakes in the companies to shore up Leighton's books.

Ten, Lachlan Murdoch

Ten Network Holdings acting boss Lachlan Murdoch made his first public appearance yesterday and the network's third largest shareholder didn't mince his words about the urgent rehabilitation needed to revitalise the company. Ten posted a 15.6 per cent drop in its half-year profit yesterday and Murdoch was candid in his appraisal of just what has gone wrong at the network. Presumably it was these concerns that prompted Murdoch and James Packer to usher in the changes at Ten and there may be more to come. Murdoch flagged that realising the full potential of Ten will require further tough decisions but for the time being the immediate focus in on relaunching the all sport digital channel One, which has been a serial underachiever, into a more general channel. A revamped One is set to hit the screens on May 8. Ten's news offerings have been the centre of attention, especially the poor performance of the George Negus led current affairs program, but interestingly its steady as she goes on the news front for the network, at least for the time being. In fact, Ten took the opportunity yesterday to add a new program to its news table, confirming the launch of a Sunday news program by conservative columnist Andrew Bolt, who seems to be a particular favourite of Ten shareholder Gina Rinehart. Apart from programming, Ten has played down talk of an imminent sale of the marketing business Eye, which Murdoch contended the network's former management had chronically neglected. So the overall message from Ten is one of cautious optimism. Cost cutting is on the agenda, channel revamps are on their way and there is plenty of potential as long as you are willing to overlook the uncertainty about weakening ad revenue, falling audience shares and when exactly CEO designate James Warburton gets to start his job

Rio Tinto, Riversdale Mining

Rio Tinto has sealed its first big acquisition since the Alcan acquisition in 2007, with the mining giant taking majority control of coal miner Riversdale Mining. Rio has secured a 49.53 per cent stake in Riversdale and declared its $3.9 billion offer unconditional. Riversdale is set to lose its executive chairman Michael O'Keeffe and non-executive director Andrew Love once Rio crosses the 50 per cent mark and the mining giant will get to install three of its executives – energy chief executive Doug Ritchie, Rio Tinto Australia managing director David Peever and the chief development officer of Rio's coal division Matthew Coulter – to Riversdale's board. Their immediate focus presumably will be to work out funding options to get Riversdale's assets in Mozambique, especially the Zambezi project, up and running – and that would mean close engagement with India's Tata Steel and Brazil's  CSN. Both Tata and CSN will be expected to give some cash to develop the assets under Rio's supervision and that leaves the door open for some friendly offtake deals between the steelmakers and Rio. The Australian Financial Review also reports that the recent change of management at Rio's arch rival Vale could help pave the way for the two miners to start talks about a possible infrastructure sharing deal in Mozambique.

NBN Co

It's been a week to forget for the NBN Co, with the company charged with building the national broadband network running into a wave of controversy after the suspension of the tender process for its multi-billion-dollar construction contract. The ensuing fallout has already claimed the head of the NBN Co's construction arm, Patrick Flannigan, and it looks like the company's manager of cost and resource estimates, Nick Sotiriou, has also left. According to The Australian, Sotiriu's departure may be linked to the shock departure of Flannigan although he has refused to comment on his reasons. The paper has also highlighted further fears of the NBN project overshooting its $36 billion budget, with further pressure from construction companies to scale back the reach of the network. With the projected cost of construction reportedly set to top $44 billion, construction companies are suggesting that perhaps the target of laying fibre to 93 per cent of homes and businesses may need to be revisited.

Wrapping up

Takeover target Equinox Minerals has finally made an official call on the $6.3 billion takeover offer from China's Minmetals Resources, and no prizes for guessing what the target has to say. Equinox has labelled the bid "clearly opportunistic” saying that the $7 a share doesn't have the necessary premium to make it a compelling offer. So let the games begin, and wait and see whether Minmetals is willing to sweeten the deal. Meanwhile, the Singapore Exchange is pressuring federal treasurer Wayne Swan to provide further details on the reasons behind his rejection of the $8 billion merger with the ASX. The SGX has sent a letter to the Foreign Investment Review Board pushing its rationale for the merger to go ahead but has refrained from announcing any amendments to the existing offer. There is a slim chance that the move is going to have any effect on the status of the deal, which is dead in the water. The SGX's move comes amid growing criticism about Swan's decision to block the merger and it looks like mining magnate Clive Palmer has joined the chorus of indignation. Palmer has reportedly warned at a business lunch in Brisbane that Wayne Swan risks becoming the laughing stock of Asia. According to The Sydney Morning Herald, Palmer has also ruled out following the footsteps of Gina Rinehart and looks to sell his coal assets in the Galilee basin. Elsewhere, the final piece of Ric Stowe's Griffin Coal empire has been reportedly sold, with an unnamed Asian player buying the Bluewaters power station.