BREAKFAST DEALS: Liberty plea

Austar's largest shareholder breaks its silence on the ACCC's puzzling concerns over the proposed merger between it and Foxtel. Meanwhile, a major ConnectEast shareholder voices his position on CP2's $2.2 billion bid, labelling it "highway robbery”. Elsewhere, hedge fund royal George Soros decides to shut the doors to outside investors, and investment banks take a keen interest in James Packer's stake in the Tabcorp wagering business. In other news, UBS flags a massive cost-cutting plan but the Australian arm of the giant may escape the pain, Norton Gold Fields recruits the help of a Chinese heavyweight to help cut its debts, and just what does Foster's suitor SABMiller have up its sleeve?

Liberty Global, Austar United, Foxtel

Regional pay TV operator Austar United's largest shareholder, Liberty Global, has broken its silence on the Australian Competition and Consumer Commission's stance on the proposed merger between it and Foxtel, with Liberty's president and chief executive Mike Fries saying that he doesn't quite understand the logic behind the regulator's concerns. Fries has told The Australian Financial Review that the ACCC is one of the few regulators in the world that doesn't see pay and free-to-air TV companies as direct competitors. Liberty operates pay TV businesses in 14 countries so Fries does have the credibility to back up that comment and oppose what he labels the regulator's narrow definition of the TV sectors. He also pointed out that Foxtel and Austar have never competed in the same space, except for in the Gold Coast, and refuted the ACCC's concern that the national broadband network will allow Foxtel and Austar to move into each other's markets. Liberty stands to pocket over $1 billion dollars from the merger and Fries has refused to speculate on what the US media giant will do with its stake in Austar if the bid is scuttled in September. Foxtel's boss Kim Williams hit back at the ACCC earlier this week but the one person who is yet to speak publicly on the issue is the competition watchdog's news boss Rod Sims, who takes charge next week. It will be interesting to see how he handles the issue given that analysts expect Foxtel to appeal to the Australian Competition Tribunal or take legal action if the September 8 decision goes against it.

ConnectEast Group, Greg Perry, CP2

As mentioned in yesterday's column, the takeover of ConnectEast Group wasn't going to be smooth sailing for its largest shareholder CP2, and it hasn't taken long for one of the target's major shareholders to speak out in no uncertain terms against the deal. The voice of dissent belongs to former equity manager for Colonial First State and veteran infrastructure investor, Greg Perry, who has told The Australian that CP2's attempt at buying ConnectEast at 55 cents a share is tantamount to "highway robbery". He also told the paper that rather than sell the business to CP2 and its foreign sovereign wealth fund backers, the government could step in and pay 60 cents for the company to fast-track the development of the adjoining link between the Doncaster Freeway and Western ring road in Melbourne. According to Perry, such a transaction would make more sense, boosting ConnectEast's cashflows which the government can use to pay off the cost of the development.

* Correction: An earlier version of the column incorrectly stated that Greg Perry holds a 16 per cent stake in ConnectEast. The toll road operator has since informed Business Spectator that Perry is not able to block the deal but would need to attract the support of 16 per cent of ConnectEast unitholders to stop CP2. Perry currently holds 16 million, or 0.43 per cent of ConnectEast units.

Meanwhile, the rush to buy global infrastructure assets continues to gather pace, with Melbourne-based Industry Funds Management reportedly paying $500 million to buy the largest district heating network in the European Union. According to Fairfax papers, the purchase in Poland makes IFM, owned by 32 super funds, one of the biggest infrastructure investors in the world. IFM manages $30 billion of funds for 60 super funds, corporate super funds and US pension funds and owns 12.8 per cent of Adelaide Airport, 18.9 per cent of Brisbane Airport, 20.7 per cent of Melbourne Airport and 55.6 per cent of the Darwin and Alice Springs airports. The papers add that it also has a stake in the Port of Brisbane and other Australian infrastructure valued at $5 billion.

George Soros

Hedge fund royal George Soros has reportedly decided to shut the shop after a four-decade career and is now set to solely focus on managing his family assets. The veteran fund manager, who turns 81 next month, has told investors that he will return around $US 1 billion to outside investors, with Soros Fund Management to be converted into a family office. According to Reuters, investors were informed of the decision through a letter which also stated that impending industry regulation was a key consideration behind the decision. Whatever the cause, the decision certainly brings the octogenarian fund manager full circle from a speculator, who made a fortune betting on the woes of the pound, to a philanthropist spearheading a number of liberal causes.  

James Packer, Tabcorp

One of the interesting things in the lead-up to the demerger of Tabcorp's wagering and casino arms was the entry of James Packer into Tabcorp's register. The move gave the media and casino mogul a 4.9 per cent stake in the now separate wagering and casino businesses, and while a move by Packer on the casino business, EchoEntertainment, is widely expected, his stake in the wagering business is now reportedly attracting attention from investment bankers. The idea of Packer's Crown empire absorbing Echo at some point makes a lot of sense, although a lot will depend on just how quickly and successfully Echo refurbishes its venues in Sydney and Queensland. However, there are many who reckon that Packer should probably offload the stake in the wagering business. According to The Australian, investment banks have been at Packer's gate looking to take the holding off his hands and at least one investment bank has been trying to gauge interest from fund managers.

UBS, Macquarie Group

It's been a sobering day in Europe for global investment banking giant UBS, which has warned that it's unlikely to meet its earnings targets set two years ago, after posting a 49 per cent drop in second-quarter profit. The Swiss banking giant also flagged plans to cut costs by $2.3 billion over the next two to three years. UBS's Australian unit is ruling the roost when it comes to equity capital markets, M&A and equity league tables and it will be interesting to see what impact, if any, the substantial cost-cutting exercise will have on the local business. The Australian reckons that the local unit, which has always enjoyed strong support from the parent, shouldn't be affected. Meanwhile, Macquarie Group has made credit ratings agency Moody's list of global systemically important financial institutions. According to Moody's, Macquarie had scored highly in terms of its reliance on wholesale funding and complexity but was the smallest bank on the list. It scored an 11 on a global scale of interconnectedness, complexity and size, with the top spot going to Deutsche Bank with a score of 23.3. In terms of its level of systemic risk, Macquarie was grouped together with banks such as Unicredit, Royal Bank of Canada, Mizuho Financial and Santander. While Macquarie beat the big four Australian banks to the list, Moody's list is an informal one and the AFR reports that the bank did not make the final cut in the official list of the Basel Committee.

Norton Gold Fields, Zijin Mining Group, Xstrata, Alkane Resources

Xstrata has approved the development of the $246 million Lady Loretta zinc project in Queensland after buying the remaining 25 per cent stake it did not own in the project from Cape Lambert. Meanwhile, gold minnow Norton Gold Fields is set to raise $27.7 million with Chinese giant Zijin Mining Group agreeing to buy 138.35 million shares at 20 cents each, a 31 per cent premium on the 15-day volume weighted average price. The deal will help Norton reduce its debt levels while Zijin, which is worth more than $17 billion, will take a 16.98 per cent stake in Norton Gold and boost its gold reserves. Elsewhere, Alkane Resources has signed a non-binding agreement with Mintech Chemical Industries to form a joint venture to produce zirconium oxychloride at its East Rockingham plant. Alkane has described the agreement as a significant step forward in the development of its Dubbo Zirconia project in New South Wales.

Wrapping up

Foster's suitor SABMiller recently posted a rise in first-quarter sales but the brewer has so far remained tight-lipped about what it intends to do next with its bid. SAB's London investors haven't exactly been enthused about the move on Foster's so there is always a chance that it could decide to walk away. The other option is to revise the bid with more incentives for Foster's board and shareholders. However, there is a third school of thought which reckons that SAB could team up with another prospective suitor to make joint bid. Meanwhile, the AFR reports that department store chain Harris Scarfe's management is close to making a decision on whether to push through with an IPO or bide its time and wait for conditions to improve. Harris Scarfe fell in a heap in 2001 and has since been resuscitated under the watchful eye of investment bank Momentum Corporate. Given the current state of the retail sector an imminent IPO is highly unlikely. Elsewhere, underground mining contractor Barminco, which recently scrapped its IPO, is now quite possibly not on the radar of potential acquirer Ausdrill. Barminco will now have to look to revisit the float idea later on down the line after Ausdrill said yesterday that it's looking to set up its own underground mining contracting business. In other news, Nexus Energy has hired McDermott Asia Pacific to provide development engineering services for the Crux liquids project. The decision comes after Nexus completed its engineering and strategy review. Meanwhile, ResMed Inc has signed up US medical technology company CareFusion to distribute the company's ventilators to US hospitals. The five-year agreement gives CareFusion the exclusive right to distribute ResMed's Stellar 100 and 150 non-invasive ventilators and the related accessories. Finally, The Australian reports that Goldman Sachs has won the mandate to sell New South Wales' $1.9 billion desalination plant on the Kurnell Peninsula.