BREAKFAST DEALS: Macquarie swoop

Macquarie Group joins forces with Singapore's GIC Real Estate and Canada's Public Sector Pension Fund to lob a $1.7 billion bid for Charter Hall Office Trust and not only does a potential deal work out in the favour of the trust's manager Charter Hall Group, it also provides a handy exit for the disgruntled hedge funds on the trust's register. Meanwhile, speculation of a buy in Japan by ANZ gathers pace with Aozora Bank seen as the likely target and QR National boss Lance Hockridge says he is not worried about BHP's plans to build its own rail line in Queensland. In the mining sector, Atlas gets closer to tying the knot with FerrAus and Robert Millner's New Hope Corporation moves to mop up Northern Energy. Elsewhere, Nine Entertainment's debt restructure continues to garner attention and Maryborough Sugar Factory could be next big target for cashed up Asian suitors.

Macquarie Group, Charter Hall Office REIT, Charter Hall Group

Macquarie Group has set the consolidation ball rolling in the Australian real estate investment trust sector with its well-timed pitch for Charter Hall Office REIT. Macquarie has reportedly joined forces with Singapore's GIC Real Estate and Canada's Public Sector Pension Fund to lob a conditional, non-binding, indicative $1.7 billion bid to grab COQ's undervalued local portfolio. It has been an interesting six weeks or so for COQ and its manager Charter Hall Group, which recently managed to quell the rebellious hedge funds – Orange Capital, Luxor Capital and Point Lobos – and the latest deal on the table is a blessing for Charter Hall. As The Australian Financial Review's Chanticleer column rightfully points out, the Macquarie bid is akin to a management buyout given that Charter Hall's 13.4 per cent stake in COQ is not subject to the bid and it will retain its position as the trust's manager if the suitors are successful. It puts Charter Hall in an unenviable position of power – by distancing itself from the consortium, it keeps corporate governance issues at an arm's length and that 13.4 per cent stake could prove to be a key factor if a rival bid emerges. Macquarie's bid of $2.39 a unit is at a 9 per cent discount to the pro forma net tangible asset backing of $2.63 a unit. The offer does get bumped up to $3.52 a unit once the $US1.7 billion sale of the trust's US portfolio to Boston-based Beacon Capital Partners is completed, but COQ's independent directors are unlikely to jump on board just yet and could probably squeeze a little bit more out of the suitors. Things will get really interesting if another party decides to have a go but the Macquarie-led consortium is on solid ground and it probably won't mind sweetening the offer a touch if the need arises. As for the hedge funds that control about 20 per cent of COQ, the Macquarie pitch could be exactly what they have been waiting for to make a profitable exit after failing to dislodge Charter Hall as the trust's manager. The hedge funds should be happy to sell and for a change will actually be on the same page as COQ's independent directors as both parties will be looking for a higher bid.

ANZ Banking Group, Aozora Bank, Tokyo Star

It looks like the rumour of ANZ Banking Group boss Mike Smith's developing an appetite for Japanese assets may not be unfounded after all, with Japan's Yomiuri newspaper reporting that that the bank is in talks with Aozora Bank's majority shareholder Cerberus Capital Management over a potential deal. The speculation has focused on a possible tilt at either Aozora or Tokyo Star Bank but the reports in the Yomiuri and the AFR would suggest that Aozora is the target for now. ANZ has the money for any potential deal having raised a fair chunk of spare capital, and acquisitions are critical if it's serious about its Pan-Asian growth strategy. That strategy is usually broken down to either an assault on the fast growing Chinese and South Asian markets or a move on the more tempered North Asian ones. ANZ showed last year with its failed $3.8 billion bid for a 51 per cent stake in Korea Exchange Bank that its strategy is not dominated by China or South-East Asia so a move in Japan is not unreasonable. However, analysts are still in two minds about just how the game is going to pan out, with some pointing out the rather laborious KEB negotiations as an indication of what is to come. Others have noted that local investors may not be enthused about the prospect of ANZ moving into a market characterised by low returns and little growth. According to the AFR, CLSA analysts have even suggested that ANZ may actually be better off having a look at Tokyo Star rather than Aozora, citing Tokyo Star's useful branch franchise and clean home mortgage book.

QR National, BHP Billiton

QR National boss Lance Hockridge had a clear message for his shareholders yesterday as the coal hauler posted an annual net profit for the year to June 30 of $349.5 million: BHP Billiton's planned rail line in North Queensland is not going to have any impact on its contracts with the mining giant. Hockridge told shareholders that the planned BHP infrastructure is designed to take care of the extra tonnage that the miner is hoping to extract from its mines in the region and will in no way affect the haulage QR National has already contracted with the miner. As The Australian's Matthew Stevens points out this morning, Hockridge's positive spin and solid results have failed to convince all of its critics, most notably its customers, who are peeved that QR National is "still trying to gouge risk-adjusted rates of return for a risk-free business!" According to Stevens, the criticism "captures the bifurcated irritation of QR Nationals' coal critics. Its haulage business is left vulnerable by its sustained history of poor service delivery and even worse customer engagement, while its network management arm has been targeted for recent (and quite successful) efforts to secure increases in access pricing."

Atlas Iron, FerrAus, New Hope, Northern Energy

There was plenty of action among second-tier miners yesterday with Atlas Iron and Robert Millner's New Hope Corporation in the thick of things. We start with Atlas, which is now closer to tying the knot with FerrAus after the target's shareholders approved the rather complicated deal unveiled by Atlas in June. Under the terms of the offer, FerrAus will issue Atlas 37 million shares at 65 cents, then FerrAus will buy Atlas's Pilbara iron ore assets for 159.2 million shares and Atlas will subsequently acquire FerrAus in a one-for-four offer. The result is a big blow for FerrAus' major shareholder and erstwhile suitor Wah Nam Holdings given that the other major Chinese shareholder on FerrAus' register – state-owned China Railways Materials (which owns a 10.1 per cent stake) has agreed to vend its stake into the offer. Meanwhile, New Hope has returned to mop up the minorities in coal explorer Northern Energy. New Hope and Northern Energy were locked in a long-winded slanging match last year that eventually saw Northern Energy accept a $1.85 a share offer, however the offer period closed before the suitor could achieve 90 per cent acceptances. This time around New Hope is offering $2 a share in an unconditional cash offer for the 19.17 per cent of Northern Energy it does not own. In other news, Auzex and its joint partner GGG Resources have decided to bury the hatchet and join forces to run the Bullabulling gold project in Western Australia. The two will now merge to form Bullabulling Gold through an all-scrip merger of equals, with the new entity to be listed on the ASX and in London's Alternative Investment Market.

Wrapping up

The restructure of Nine Entertainment's $3.6 billion debt load continues to garner a great deal of attention, with the AFR now reporting that the bid of Nine's owner, CVC Asia Pacific, to restructure mezzanine debt in a way that preserves some of its equity is unlikely to be supported by senior lenders, who are increasingly worried about Nine's earnings. In other private equity news, CHAMP Private Equity is reportedly re-considering exit options for its logistics business, International Energy Services, after its planned sale of the whole business in 2009 failed to deliver any results. In the food sector, with the battle for Proserpine Sugar between China's Cofco and Sucrogen heating up, there is talk that Maryborough Sugar Factory might be on the list of cashed up Asian suitors. Thailand's Mitr Phol already owns a 22 per cent stake in MSF and if talks of a third party building a position in MSF's register are true, then it may prompt Mitr Phol to launch a full takeover bid. Just who the mystery party could be is unclear at the moment, but given Chinese giant Bright Food Group's acquisitive comments to the AFR this morning, its interest in MSF can't be ruled out. Finally in overseas news, Bank of America has announced the sale of half of its holding in China Construction Bank just days after securing an expensive $US5 billion lifeline from Warren Buffett. The US bank will sell 13.1 billion shares in the Chinese bank to unidentified investors for $US8.3 billion.