BREAKFAST DEALS: Macquarie of Arabia

Macquarie and Oil Search look to the Middle East as a financial oasis, while Spotless and Whitehaven Coal consider acquisitions closer to home. Also today, coverage of Rio Tinto, Computershare, Iress and more.

Macquarie Group

There have been rumours for a couple of months now of National Australia Bank making a cornerstone investment or acquisition in an Islamic finance provider in the Middle East. As Stephen Bartholomeusz writes, however, Macquarie Group has beaten NAB to the punch by announcing intentions to invest $US100 million in Gulf Finance House (GFH), a Bahrain-based Islamic merchant bank that former NAB Australia chief executive Ahmad Fahour joined as CEO just over a month ago. Macquarie's memorandum of understanding with GFH follows its $516 million acquisition of Delaware Investments from Lincoln Financial Group in the last week and reports of "serious discussions" with London-based corporate advisory firm Fox-Pitt Kelton. Earlier this year, Macquarie purchased Tristone Capital, a Canadian energy advisory company, and the gas trading business of Constellation Energy. A stake in GFH, which conservatively invests money according to Islamic Sharia principles, continues Macquarie's metamorphosis into more traditional merchant banking. Then again, as Bartho points out, GFH is known as the "Macquarie of the Middle East” with its array of off-balance sheet infrastructure investments. A kind of Halal silver doughnut perhaps. Elsewhere, NAB has opted not to follow the path of ANZ after receiving a massive oversubscription on its retail share purchase plan. NAB will instead scale back $2.6 billion worth of applications to the $750 million it sought.

Oil Search

Another company doing business with the Middle East is Papua New Guinea-focussed Oil Search, which is finalising the terms of a 3.5 per cent sale of its massive LNG project to International Petroleum Investment Corporation of Dubai. It has been estimated that the sale could be worth some $1 billion to Oil Search, which otherwise owns 34 per cent of the project. The integrated development, operated by ExxonMobil, comprises twelve well pads, production wells, gathering systems and processing plants as well as an LNG liquefaction plant and facilities near Port Moresby and a 785 kilometre pipeline from there to the PNG Highlands. The project, which replaces earlier plans to build a sub-sea LNG pipeline to Australia, began two year ago with pre-front end engineering design studies. First LNG sales are expected in four to five years.

Spotless Group

Cleaning, catering and laundry company Spotless Group has announced plans to raise up to $100 million and pursue "bolt-on opportunities" amid financial results that saw net profit after tax increase a sparkling 64.2 per cent to $42.7 million. The raising, by way of a $71 million placement and a share purchase plan to raise up to $29 million, will at minimum also reduce Spotless' gearing to 31.2 per cent from 40.5 per cent. That is, after the acquisition of $14 million worth of shares in Taylors Group that Spotless does not already own. New Zealand-listed Taylors, which Spotless bought a 66 per cent stake in ten years ago in what could also be described as a bolt-on acquisition, is being offered $NZ2.08 per share. Taylors shareholders will also remain entitled to receive a 7 cent fully imputed final dividend, Spotless said. That offer represents a 22 per cent premium to monthly VWAP to August 24, which the Spotless placement is being undertaken at a 10.9 per cent discount to five-day VWAP. Spotless recently bought painting company Riley Shelley, laundry group Pearl and Perth cleaner Arrix. GoldmanSachs JBWere is believed to be doing the underwriting.

Whitehaven Coal

Another company eyeing bolt-on acquisitions is Whitehaven Coal, which was pursuing a merger with Gloucester Coal earlier this year, only to see that scuttled by Gloucester's cornerstone shareholder, Noble Group. Whitehaven, which posted a $244.2 million profit, noted however that such opportunities were "few and far between" following the likely purchase of Felix Resources by China's Yanzhou Coal. Despite Australia's traditional coal trading relationship with South Korea and Japan, there has been increased interest in Australian coal assets from the energy-hungry emerging giants of India and China. Having said that, Whitehaven did sell a 7.5 per cent stake in its Narrabri project to South Korea's Daewoo for $136 million earlier this month and another 7.5 per cent stake before that; contributing strongly to its profit result. Already Indian-owned Gujarat NRE Minerals has bid for Rey Resources and Essar Minerals has been in talks with Caledon Resources. Meanwhile, China Shenhua Energy is thought to be interested in an Australian acquisition and even Whitehaven itself has been listed as a potential takeover target.

Wrapping up

Market register group Computershare has bought Denmark's I-nvestor Relations Service for $US12.4 million as talk of the ASX buying Iress Market Technology continues to keep the latter's shareprice just a tad under $8 per share. After losing a significant supervisory role to the Australian Securities and Investments Commission, the ASX has even more reasons to expand elsewhere as a business. Deals in Asia's banking sector continue with Hang Seng Bank considering an A-share listing in Shanghai, according to media reports, and Japan's Sumitomo Mitsui planning to launch an investment banking unit. Elsewhere, Daylight Resources has announced plans to buy Highpine Oil in Canada, while Toronto-listed Crescent Point Energy Corporation has agreed to buy Wave Energy in Saskatchewan for $CAD665 million. Also in resources, BC Iron is likely to trade sideways now that the news of its finalised joint venture agreement with Fortescue Metals Group has sunk in, but no such clarity for Rio Tinto, which is looking rather sheepish after Chinalco said it did not know why Rio boss Tom Albanese was referring to "early-stage" talks between the two companies. Icy.