BREAKFAST DEALS: Macquarie's Europe

Macquarie eyes battling European financial firm Dexia, while global miners gain a bargain from the late Ken Talbot.

Macquarie Group has made no secret about its international wealth management ambitions, but would the investment bank risk entering the beleaguered and bailed-out European market to expand? This morning, deal watchers say there's a strong chance. Elsewhere, international miners dig up bargains at the estate sale of late coal baron Ken Talbot, and Northern Iron gets a higher bid from India. Meanwhile, analysts say the tide might be turning for Billabong.

Dexia, Macquarie Group

Australia's largest investment bank, Macquarie Group, is rumoured to considering bulking up its international asset management business.

Speculation is focussed on troubled Franco-Belgian financial firm Dexia, which has confirmed it is in final talks with three potential international buyers interested in its wealth assets. The Australian Financial Review says Macquarie might be one of them.

Dexia, which manages more than $90 billion worldwide, is highly exposed to Europe and European equities – not exactly a selling point in the current environment. Macquarie is also off its peaks, and has the depressed share price to prove it.

However, the investment fits with Macquarie chief Nicholas Moore's ambition to grow his firm's asset management business. The Australian Financial Review also notes that Macquarie's purchase of Delaware Investments in the US for $US428 million in 2009 is considered a highly successful acquisition.

There are unlikely to be any firm details before Moore faces investors at Macquarie's AGM today, but keep an ear out for hints about international opportunities.

Anglo American, Talbot Group

The estate of late mining tycoon Ken Talbot has sold its majority stake in the Revubo metallurgical coal project in Mozambique for $540 million, after drawn-out negotiations with buyer Anglo American.

The six-month-long talks appear to have favoured Anglo, which will control Revubo alongside minority partners Nippon Steel and Posco. Deal watchers will remember reports last year that the asset could sell for as much as $US630 million.

Talbot Group director of resources Denis Wood told The Australian Financial Review the lower price tag reflects the recent downturn in the coal market.

Perhaps as a consequence, Wood says there are no plans to sell Talbot Group's final major investment, a 12 per cent stake in Karoon Gas, until it can obtain a good price. The market currently values the holding at around $100 million.

The Karoon sale would close out a process that began last year, when Talbot Group offloaded its 16 per cent stake in Sundance Resources to China's Hanlong Mining for $191 million.

Aditya Birla Group, Northern Iron

Also in the resources space, Northern Iron is now considering a sweetened takeover offer from India's Aditya Birla Group.

Aditya lifted its bid to $1.40-a-share on Tuesday, valuing the target at about $518 million. That's nearly nine per cent higher than the Indian group's initial indicative offer, worth between $1.23 and $1.29, which was rebuffed in May for being too low.

The bidding follows Northern's appointment of Goldman Sachs last November to consider the miner's options, including a full sale. So far Aditya is the only potential buyer to emerge.

Aditya is chasing Northern's promising Sydvaranger project in Norway, which produces about 2.1 million tonnes of iron ore a year. But the Australian-based group plans to more than double output to 5.6 million tonnes by 2016.

Northern has called Aditya's latest offer an "indicative, non-binding stage-one proposal," so it's still early days. The target must now decide whether to allow Aditya to enter second-stage due diligence.

Expect to hear back from Northern within a week.

Billabong International, TPG

There might be hope for Billabong International investors yet, as analysts tip that private equity bidding for the surf wear company could reach $1.60 a share.

As flagged here yesterday, TPG has launched a renewed "indicative, non-binding and conditional" proposal to buy Billabong for $1.45 a share – or about $695 million. That's substantially less than the $3.30-a-share offer Billabong rejected just four months ago.

Citigoup estimates that TPG – or any other private equity bidder, for that matter – could still achieve a 27 per cent internal rate of return at $1.60, assuming a conservative three-times net debt-to-earnings before interest, tax, depreciation and amortisation, and 400 basis points of margin recovery, according to The Australian Financial Review.

Billabong is cheap, there's no doubt about that. Indeed, there is already speculation about a rival bid by VF Corporation, according to a separate Fairfax report.

However, after making such a mess of the last approach, you have to wonder whether the retailer has the bargaining power to achieve a price much higher than what's now on the table.

Apollo Global Management, Nine Entertainment, Oaktree Capital Management

Meanwhile Nine Entertainment, another big-name buy being considered by TPG, is doing it tough in the lead up to the broadcast of the London Olympics beginning this week. Nine and Foxtel paid $100 million for the exclusive rights to air the games.

Media buyers and networks have told The Australian Nine could face a $40 million write-off on its Olympics coverage, amid reports the network is still shopping around prime-time advertising blocks two days out from the opening ceremony. The sources said the situation was highly unusual.

Nine is already at risk of breaching its debt covenants, as it scrambles to service $2.8 billion dollars in loans by February. The hedge funds that own the majority of the media company's debt, led by Oaktree Capital Management and Apollo Global Management, are hoping to take control by converting those loans to equity.

Word is, Oaktree and Apollo are closely monitoring Nine's Olympic losses.

Wrapping up

There were no signs that Alesco would change its view that DuluxGroup's $2.23-a-share buyout offer materially undervalued its businesses, after the target defended its $13.9 million full-year loss yesterday.

Alesco, which makes garage doors and building products, repeated that it was in the middle of a major restructure designed to help the company withstand a tough housing market. It plans to generate earnings growth in the next three to four years.

It reiterated that shareholders should reject Dulux's hostile bid, valued at about $210 million.

Meanwhile, corporate raider Mariner Group has dropped its $14 million bid for former stockbroker, Austock.

The move, revealed in a note to the Australian Securities Exchange on Tuesday, comes after the target said it wants to sell its property management business, which has assets of about $555 million, to Folkstone for $11 million.

"We believe this was a blatant attempt to block Mariner’s bid,” Mariner said in its statement yesterday. "There are many other opportunities for Mariner shareholders to pursue in the current market, and we believe it will be more productive for Mariner to turn its resources to pursuing those other opportunities.”

In local tech news, US billionaire Peter Thiel, one of the original minds behind Facebook, has made his first Australian investment in Sydney start-up ScriptRock.

Thiel, who also co-founded PayPal, will invest in the group through his venture capital firm, Valar Ventures, which yesterday attached itself to a $1.2 million funding round. It's unclear how much cash Valar committed.

ScripRock currently helps IT administrators test, store and share and test their server configurations, and will use the new funding to expand into the US.

Finally, Accolade Wines has inked a bottling deal with Treasury Wine Estates, which will see the local industry's largest competitors work together to lower packaging costs.

Under the agreement, TWE will bottle Accolades wines in Australia, and Accolade will bottle for TWE in the UK.

Accolade now plans to close its Adelaide bottling operations and lay off 175 workers.

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