BREAKFAST DEALS: Macmahon megadeal

Macmahon Holdings has landed a big fish right when it needed to. The megadeal with Fortescue should make the upcoming meeting on the Leighton Holdings construction business sale a little easier to get through. Qantas and Emirates are officially selling tickets together today, effectively beginning their five-year alliance. Meanwhile, the Future Fund is coming under heavier fire for its Australian Infrastructure Fund deal, reports of Santander's NAB denial completely miss the point and Discovery Metals is expected to reveal its Boseto hand today, with its Chinese private equity suitor watching closely.

Macmahon Holdings, Fortescue Metals Group

Macmahon Holdings has demonstrated a knack for timing with the announcement of a $1.8 billion contract with iron ore miner Fortescue Metals Group.

The mining services company's share price jumped 5.9 per cent during yesterday's session as investors contemplated the significance of Macmahon's largest ever contract.

Fortescue has tapped Macmahon for mining services at its Christmas Creek mine, which is being expanded. The deal covers everything from drilling and blasting, maintenance and moving about 300 million bank cubic metres of iron ore and incidental material.

Chief executive Ross Carroll thanked Fortescue in a statement to the market for a contract that takes Macmahon's work on order to $3.6 billion, its highest level in the company's history.

Juxtapose that with the recent narrative surrounding the company. The share price is down 60 per cent over the last 12 months with a series of problems leading to the effective exit from the construction business.

Macmahon's decision to focus on mining services and sell most of its construction contracts to major shareholder Leighton Holdings won ticks from the get-go.

The complicating factors are that the independent expert Ernst & Young concluded that the $25 million purchase is reasonable but not fair. That, and Sembawang Australia has been playing funny buggers with a superior, but conditional and terribly timed counter offer for the construction business.

Macmahon has commendably put the Leighton proposal to a vote. Granted, Leighton has 24 per cent of Macmahon so the result is likely to fall in its favour, but too few companies empower shareholders when big strategic decisions are being made. When it's done, it deserves praise.

To win shareholders over, the board and management have to convince them that things might have been bad, but we've got a plan to get out of this.

Hence, the Fortescue deal couldn't have been better timed.

Speaking of iron ore's third force, Fortescue has handed over control of a parcel of land to Northern Star Resources as part of a $6 million deal.

The joint venture agreement with Fortescue will deliver to Northern Star up to a 60 per cent interest in Fortescue's non-core tenements around Northern Star's Paulsens and Ashburton projects.

Qantas, Emirates, Virgin Australia, SkyWest, Tiger Australia

The five-year alliance between Qantas Airways and Middle Eastern giant Emirates has effectively begun.

Travellers can now book flights via a combination of Qantas and Emirates services after the two airlines went live with their combined ticketing services yesterday. The exceptions are the Trans-Tasman routes, where there are still regulatory concerns.

The move follows the decision by the Australian Competition and Consumer Commission to give Qantas and Emirates interim approval for the five-year deal, despite ongoing objections from competitor Virgin Australia.

Final approval is now appearing to be something of a formality in March/April, with ACCC chairman Rod Sims saying that fresh arguments against the alliance will have to be put forward.

However, next week the competition regulator will hold an open meeting where parties concerned about the proposal – think competitors and unions – can voice said concerns.

Qantas has decided against calling for a closed meeting, which is a wise decision. The airline is acutely aware of the highly sensitive nature of the proposal and any whiff of covering up details would be an unnecessary PR problem for a deal that is almost certainly a lock.

Plus, Qantas has had everything thrown at it. What more could anyone come up with?

Virgin is currently sweating on its own ACCC case, with the regulator due to rule on the carrier's proposed takeover of SkyWest on January 31.

The ACCC is dwelling on Virgin's purchase of a 60 per cent stake in Tiger Australia, which is raising more competition concerns. The decision deadline has been delayed until February 7.

Future Fund, Australian Infrastructure Fund

The Australian Financial Review has revealed yet more details this morning about the simmering tensions between the Future Fund and Australian superannuation funds (both of which are providing for somebody's retirement).

The structure of a $2 billion bid for airport investments at Australian Infrastructure Fund is what's being disputed.

The Fund is being accused of ‘gaming' the assets. In this case it involves offering lowball valuations for European airport stakes, where no pre-emptive rights exist, to make room within the bid for higher valuations for Australian assets, where pre-emptive rights do exist.

The practice makes it more difficult for existing stakeholders in these assets to match the Fund.

"It is clear they are lowballing the European airports to stop super funds getting their hands on Perth and Gold Coast,” one super fund executive told the AFR.

There are two confusing takeaways from this clash.

Firstly, it'd be nice to hear what AIX thinks its own individual assets are worth. Secondly, complaining that someone is valuing your own asset too highly sounds, well, just a little funny.

National Australia Bank, Santander, Clydesdale Bank, Yorkshire Bank

The coverage of the apparent interest from Spanish bank Santander in National Australia Bank's UK business has been at times laughable.

NAB shares lost some of Monday's gains during yesterday's session following word from Santander that it's interested in organic growth in the UK (as opposed to organic contraction) and that it denies it's in discussions with NAB about Clydesdale Bank and Yorkshire Bank.

The original report from The Times said quite clearly that Santander executives in London and Madrid were talking about a £2 billion ($3.2 billion) offer. There was no mention of any talks with NAB.

It's perhaps telling when someone denies a suggestion that's never been made.

This column still believes that a bid for Clydesdale and Yorkshire is unlikely to succeed as NAB boss Cameron Clyne would have to take a big hit on the business. They've waited this long for the business to return to profitability, why not wait a little more.

That's unlikely to quiet the agitations of investors who would like to see NAB sell out at below book value.

Wrapping up

Discovery Metals didn't end up relenting to demands from Chinese private equity suitor Cathay Fortune for updates on details of the target's flagship Boseto copper mine in.

However, The Australian Financial Review reports that Cathay Fortune executives and their Citigroup advisers are expecting those details sometime this morning.

The outcome could have significant ramifications for the power struggle between the two, as Discovery attempts to maintain the argument that the $830 million takeover offer from Cathay is too small.

Meanwhile, Perth's shipbuilder Austal has begun a partnership with a Singaporean shipyard company called, rather straightforwardly Sembawang Shipyard. From what we can tell, that's the same Sembawang that's been agitating Macmahon.

Sembawang will be providing support to Austal as the company tries to get the most out of its contract with the US Navy covering 10 joint high speed vessels. The contract is worth up to $5 billion.

In retail, Myer and David Jones are reportedly fighting over the exclusive rights of designer Kimberly Ellery, with just a few weeks before the winter collections are rolled out.

These battles are becoming increasingly important for the two big department stores as the struggle to get retailers to spend centres on a shopping ‘experience'.

The exclusive distribution signatures of designers are becoming vital when they could, as some have, distribute the prized goods themselves for a lot less than the department stores ever would.