BREAKFAST DEALS: Macquarie race

Macquarie Group is in the running to pick up cheap Euro loans, and could Fortescue partner with Baosteel?

ANZ Bank chief executive Mike Smith has so far been the face of Australian banking executives hoping to build their company’s future on the misfortune of the Europeans, specifically by picking up Asian assets. But ANZ isn’t the only potential beneficiary. Macquarie Group is reportedly in the running to pick up billions in discounted aircraft financing loans as Societe Generale tries to right itself. Meanwhile, Fortescue Metals Group is likely to take a partner to develop the much-bigger-than-first-thought North Star magnetite tenement – could this be an opportunity to build on its relationship with China’s Baosteel? Elsewhere, some big savings have been spotted in the Whitehaven-Aston tie-up, Goodman Fielder and Billabong both bear the marks of a struggling company with curious private equity fingerprints and a back of the envelope calculation shows Spotless Group’s register is getting quite crowded with shareholders that want a board spill.

Macquarie Group

Australia’s largest investment bank, Macquarie Group, is reportedly in the mix to grab up to €3 billion ($3.7 billion) worth of aircraft financing loans from a struggling European bank at a discount to their face value. Societe Generale announced in September last year that it was offloading the loans as part of a push to reassure investors who were concerned about the large chunk of Greek debt on the bank’s balance sheet. The Australian Financial Review understands that Macquarie Group is one of a number of players from Asia hoping to grab the loans.

Separately, the same newspaper reports that the silver donut is taking on up to six investment banks for one of two or three joint lead manager roles for the float of Might River Power, a government-owned New Zealand electricity retailer, on the New Zealand Stock Exchange. Macquarie is believed to be going up against Deutsche Bank, Goldman Sachs, Credit Suisse and Bank of America Merrill Lynch.

Fortescue Metals Group

Just who is most likely to be the partner Fortescue Metals Group chairman Andrew Forrest seeks to develop the North Star magnetite project with? Fortescue has just upgraded the size of the tenement by 72 per cent, and claims that when combined with the deposit at Glacier Valley – which falls under a joint venture with China’s Baosteel – North Star is one of the largest magnetite deposits in the world.

Given that Fortescue hasn’t ruled out listing its magnetite assets on the Hong Kong Stock Exchange, it makes sense that its partner could very likely come from China. Baosteel has already shown some trust in Fortescue, so maybe it’s time to develop the relationship.

Linc Energy

Late last week, shares in Linc Energy surged 18 per cent to $1.33 amid speculation that it was close to offloading its Teresa coal tenement in Queensland. The underground coal gasification company was issued with a speeding ticket for the ascent and chief executive Peter Bond told the market yesterday that a deal was not imminent.

However, Bond added that the company was in talks with a "potential cornerstone investor” about significant opportunities in China. While Linc shares were off 3.4 per cent, they held on to the majority of gains from last week, in a falling market – so between this week and last, Linc shareholders have heard something they like.

Whitehaven Coal, Aston Resources

The planned merger between Whitehaven Coal and Aston Resources to create Australia’s largest independent coal company has reportedly received an endorsement from CLSA analyst James Stewart, with a catch. According to The Australian, Stewart has upgraded both stocks to a buy in no small way because the merger will create $259 million in savings from operational, corporate, blending and tax sources.

However, the paper says Stewart believes that’s almost entirely offset by the overvaluation of Boardwalk Resources. Boardwalk is the privately held coal hopeful of coal high-flyer Nathan Tinkler. In Stewart’s opinion the up-to $491 million valuation that the deal places on Boardwalk is excessive, but a price worth paying to secure Tinkler’s support – as he owns 38 per cent of Aston – for the greater good of the deal.

Goodman Fielder

Short sellers have pushed shares in Goodman Fielder down to 42 cents, which is three cents beneath the level at which the bread maker raised $259 million from the register in October last year. The company is a victim of the supermarket wars, with the two majors driving down the prices of their in-house brands. Management has a turnaround strategy in place but the market is clearly sceptical.

About nine months ago analysts were pushing Goodman Fielder forward as a potential target for private equity, but nothing really came of it. Since then the company has lost 65 per cent of its value. Opportunists have something to work with, it’s just a matter of whether they believe value can be extracted from a company that’s in no small way battling Woolworths and Coles.

Speaking of food (of a kind) and private equity, The Australian Financial Review says CHAMP Private Equity has won exclusivity on the sales process for Queensland-based VIP Petfoods. The paper says the figures being discussed are in the high $300 millions.

Billabong International

Embattled clothing retailer Billabong International is in a similar position to Goodman Fielder. The quintessential Australian brand has been rocked recently by profit downgrades, with its share price shedding almost 80 per cent of its value over the last 12 months. There have been whispers that private equity players have had a look at the company but nothing’s come of it yet.

Spotless Group

Frustrated Spotless Group shareholders with more than five per cent of the register, the minimum for calling a meeting for a potential board spill, have one question to ask themselves. If we call a meeting, would a spill motion get up? Many shareholders have criticised chairman Peter Smedley for not being more willing to engage with private equity suitor Pacific Equity Partners over a $711 million offer.

It’s been said that because of the likely high turnout of a tightly held register, antagonisers would need around 40 per cent of stock calling for a spill for the motion to pass. Orbis Australia, Investors Mutual and Lazard have all indicated to some degree that they could support a spill motion, which would make up about 26 per cent of the register. But The Australian Financial Review understands that another shareholder with 6-8 per cent would also side against the board. That makes 32-34 per cent. It’s getting close.

Wrapping up

Telstra chief executive David Thodey is still waiting on the Australian Competition and Consumer Commission to bed down his company’s $11 billion deal with the government, but he’s starting to talk about what management might do with the money. In an interview with The Australian Financial Review, Thodey has begun talking seriously about capital management and special dividends. Meanwhile, in property, the same newspaper says Moelis & Co believes Stockland is running a lazy balance sheet, which could be a sign that it’s keeping all options open for a possible run at Centro Retail Fund.

In finance, adviser Lazard has reportedly been given five weeks to locate a buyer for the Australian equities and advisory arms of Royal Bank of Scotland before employees start getting sacked. It’s hoped that Lazard can sell off the operations to one of the big four banks but, according to Bloomberg, time is a limited commodity for Royal Bank of Scotland, which needs to dramatically shrink its footprint, and fast.

Over in resources, Neon Energy has got the market wondering which global energy player it’s signed a deal with for the development of its offshore assets in Vietnam. Attention is centring on Shell and BP, and ExxonMobil to a lesser extent. Not bad company at all. Meanwhile, shares in Senex Energy jumped on a report that AGL Energy is having a look at the Cooper Basin explorer. Given the news yesterday from French giant Total SA, AGL could have some company.

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