BREAKFAST DEALS: Macquarie outbid?

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Macquarie Group looks to have been bettered by JPMorgan Chase in its bid for RBS Sempra.

Macquarie Group, RBS Sempra, JPMorgan Chase

Macquarie Group seems to have been bettered in its bid for RBS Sempra, with US investment bank JPMorgan Chase reportedly in exclusive talks for the commodity trading joint venture. Sources have told Reuters that while Macquarie handed in a bid worth almost $US4 billion, JPMorgan is willing to pay a higher price. The business is likely to be sold in full, the source said, following musings over whether US utility and natural gas group Sempra Energy would offload its 49 per cent stake into a deal. The third interested party in the business is Deutsche Bank, which has flagged its desire to become one of the world's biggest commodity traders. While the Royal Bank of Scotland has a four-year deadline to sell off its stake, the majority government-owned bank wants to strike quickly while the asking price remains attractive. JPMorgan, which just reported a $US3.3 billion fourth-quarter profit and boosted its commodity trading business with the purchase of Bear Stearns, will become the world's fourth-largest commodity trader if the deal proceeds, behind Goldman Sachs, Morgan Stanley and Barclays Capital. The reports follow a series of small acquisitions by Macquarie, bulking up in the US power trading sector and expanding in funds management and advisory. Still, as the cashed-up investment bank shifts from its listed fund model to more traditional investment banking, a larger-scale acquisition to expedite commodity trading ambitions cannot be ruled out for the silver donut, albeit at a later date. Lazard is handling the RBS Sempra sale.

National Australia Bank, AXA Asia Pacific Holdings, AMP, AXA SA

While speculation mounts that National Australia Bank might float part of its British operations to help fund a bid for soon-to-be-offloaded UK assets, the competition watchdog is looking into the bank's surprise counterbid for AXA Asia Pacific Holdings, noting that the bank and wealth manager overlap in the areas of life insurance, super, wealth management, financial planning and advisory services. The Australian Competition and Consumer Commission is already looking at AMP's bid for the same company, with findings to be released on February 10. The ACCC study follows a report by Rainmaker suggesting that if the NAB proposal goes ahead, the market share of its financial planning business will soar while an AMP takeover will leave the top three players – Westpac/BT, NAB/MLC and AMP – with similar market shares. Meanwhile, a source has told The Australian Financial Review that the NAB will register its interest in RBS assets, although a purchase is by no means guaranteed. Exclusivity talks between AMP and AXA Asia Pacific's major shareholder, AXA SA, conclude on February 6, opening the way for NAB to start negotiations with the French insurer. Another train of thought is that AMP might come back with a sweetened offer, although capital constraints and previous statements about a 'best and final' offer might weigh. Should the NAB offer succeed, AMP is seen as vulnerable to a big bank takeover offer, particularly from ANZ Banking Group, albeit at a hefty price tag. But according to The Age, another path for AMP would be making a play for a regional bank, most likely Bank of Queensland. On the topic of ANZ, it was interesting to note comments from chief Mike Smith in Hong Kong yesterday that buying opportunities might emerge as the sector consolidates. Smith also warned of market volatility and aftershocks this year – food for thought given his history of tipping doom and gloom ahead of the curve.

Connector Motorways

Now that Lane Cove Tunnel operator and owner Connector Motorways has been placed in receivership, there are questions about which parties will swoop on the 3.6 km tunnel, with international pension funds, Queensland Investment Corp, Transurban, infrastructure investor CP2 and Macquarie Infrastructure Group among the names bandied about. MBIA Insurance, the guarantor of the road's bond facilities, has been on the lookout for potential buyers since September, with the Sydney Morning Herald tipping an outright sale to bring in up to $600 million – a shadow of the $1.6 billion development cost. While a recapitalisation is another option, given the problems faced by the Connector Motorways consortium – which includes Mirvac, Leighton Holdings, and Hong Kong's Li Ka-shing – investors might deem the idea to be throwing good money after bad. Toll road operator Transurban finds itself in a tricky situation: given two of its major shareholders are attempting to take it private, an acquisition would seem a tough ask, particularly if it necessitated a capital raising. There's also talk that Transurban's suitors, Canadian Pension Plan Investment Plan and Ontario Teachers Pension Plan, might take a look at the tunnel, although it would likely be a side project to the main event. The sale is being managed by Goldman Sachs JB Were.

Investment banking

There's plenty of movement in investment banking, with Merrill Lynch announcing an aggressive poaching of RBS employees yesterday. RBS co-head of markets Chris Thomas will become the new head of fixed income, currencies and commodities at the US investment bank, taking a nine-strong team with him. Elsewhere, Simon Aird, the head of equity syndicate for Asia ex-Japan for Credit Suisse, will depart Hong Kong to return to London, to be replaced by Sydney-based head of equity capital markets syndicate for Australia Ross Baildon, who in turn will be replaced by Melbourne-based Ian Arnold. There's also news of Japanese bank Nomura gaining a licence to enter the Australian market, with plans to develop a local equity trading business.

Wrapping up

For those eager to find out the next moves in Sexyland's takeover offer for Adultshop.com, the predator has boosted its bid by 7 per cent, valuing the target at almost $6 million. The offer – 0.9 cents in cash per Adultshop share and 0.12 cents per option – is final. The Adultshop board and managing director Malcolm Day – dubbed a 'Perth personality' – hold around 40 per cent of the register between them. Also in sweetened takeovers, Challenger Financial Services' insurance arm boosted its offer for Challenger Kenedix Japan Trust yesterday by 5 cents to $1.05 per unit, with a shareholder telling The Australian more money is unlikely to be squeezed from the stone. Meanwhile, it was a great day on the market for lithium company Orocobre, which signed a $US4.5 million deal with a company 22 per cent owned by Toyota Motor to help develop its lithium-potash project in Argentina. Toyota Tsuho Corp will also help the Brisbane-based company with a low-cost debt facility for at least 60 per cent of the project's development costs. Toyota is interested in lithium as part of a growing push towards electric cars. And despite a 32 per cent share price surge yesterday to $1.85, Orocobre still sits below Patersons Securities' $2 price tag. Across to telcos, and Goldman Sachs JBWere analyst Christian Guerra has tipped a difficult year for Telstra's directory business Sensis as the pre-sold advertising reflects the economic and advertising downturn. And the tough times in the wine industry continue, with Cockatoo Ridge Wines appointing voluntary administrators after being hurt by debt levels and the strong Australian dollar. Elsewhere, energy company Gujarat NRE Minerals has extended its off-market takeover bid for Rey Resource, while The Australian is tipping a $50 million raising from Perth-based miner Northern Iron, with OM Holdings of Singapore tipped to invest $35 million at $1.45 per share. And in bond-land, Queensland Treasury Corp is looking to sell non-government-guaranteed bonds,while asset management giant BlackRock is taking its first punt on Australian inflation-bonds, citing the nation's proximity to China and strong housing market and economy. And coming up on Deals TV, we'll be looking at James Packer, Nathan Tinkler and much more.