BREAKFAST DEALS: Macquarie's wings

Macquarie Group readies a hefty $5.6 billion bid for Royal Bank of Scotland's aircraft leasing unit and the investment bank had better be ready for some stiff challenges from a number of heavyweight rivals all looking to get a piece of the action in the sector. Meanwhile, Macarthur Coal looks to be a reluctant backer of the $4.9 billion Peabody-Arcelor bid and Rio Tinto divests its 57.7 per cent stake in South Africa's largest copper producer. In other news, Mortgage Choice boss Michael Russell reckons that CBA is most likely going to sell its recently acquired stake in the home loans broker and QR National beefs up its coal haulage capacity. Elsewhere, Fairfax Media aims to sell its radio assets by the end of this month and QIC gets ready to farewell its chief and legendary fund manager Doug McTaggart.

Macquarie Group, Royal Bank of Scotland, Aviation Capital

Macquarie Group is likely to face stiff competition as it looks to expand its presence in the aircraft leasing business, with the investment bank reportedly readying a multi-billion dollar bid for Royal Bank of Scotland's aircraft leasing unit. RBS has recruited Goldman Sachs to run the auction for its Aviation Capital unit, valued at $US6.8 billion, which has attracted strong interest from a number of parties. Macquarie is no stranger to spending substantial cash when it comes to aircraft leasing after paying $1.6 billion last year for American International Group unit International Finance Corporation's aircraft portfolio and The Australian Financial Review reports that it is finalising a $5.6 billion bid for the RBS unit. The paper adds that Macquarie has presented Goldman with a number of options, including making an offer for the whole business, part of the business or putting together a consortium to bid for the assets. By the looks of things Macquarie is going to face some stiff competition for the unit as the aircraft leasing industry looks to be well and truly getting back on its feet, with a raft of private equity backed start-ups as well as a number of initial public offerings, most notably the $US802.5 million IPO of Air Lease, in which Commonwealth Bank of Australia holds close to a 10 per cent stake. The global financial crisis dented the aviation industry in general but things in the leasing segment have shown signs of steady improvement as airlines, particularly in Asia and the Middle East, beef up their fleets. The other big positive is that a lot of the financing concerns have been eased, with banks more willing to lend to aircraft lessors for plane purchases. Aviation Capital has been on the block since 2009, when RBS identified it as a non-core business, but it was only in July this year that things really started to get interesting when news emerged that the London-based private equity outfit Terra Firma was keen on the business. Since then, interest in the business has steadily grown and Macquarie will have to contend with some heavyweight competition, with General Electric, Air Lease, Hong Kong Aviation and Bank of China all in the mix to grab all or a piece of the world's fifth-largest plane lessor by fleet value, with more than 250 aircraft on its books. Terra Firma has been seen as a contender for some time given that it already owns AWAS and would most likely love to merge the two to create the world's third largest aircraft lessor by fleet value. The one group that Macquarie reportedly won't have to contend with is the former Qantas boss Geoff Dixon and his high profile buddies, who sold their Global Aviation Asset Management business to FLY Leasing for $US1.4 billion last month.

Macarthur Coal, Rio Tinto

Macarthur Coal has endorsed the $4.9 billion bid lobbed by Peabody Energy and Arcelor Mittal but it would appear that the move has been made more out of necessity than choice, with the miner's board citing the fears of a sliding share price if the deal falls through rather than spruiking the merits of the offer. Macarthur's target statement also provided further indications of the board's thinking, given that there was no independent expert's report on whether the offer represented value for its shareholders. Instead there were technical reports that highlighted the untapped potential of the miner's exploration projects. There was certainly no bonhomie shared between Macarthur and Peabody in the statement, with Macarthur hitting back at the stinging attacks launched by the suitors in recent weeks with regard to how the coal miner's management has failed to deliver on key projects. The Peabody-Arcelor offer will now close on September 27 and with no word from CITIC, Macarthur's management is still holding out hope that a rival bid could yet make an appearance. However, time may not be on its side and the suitors only need to acquire a 50.1 per cent stake to emerge victorious.

Meanwhile, Rio Tinto and Anglo American have both decided to sell their stake in South Africa's largest copper producer, Palabora Mining. Rio Tinto said that it has informed Palabora's board of its intention to divest its 57.7 per cent effective shareholding in the company and a commercial process to find a buyer for the shareholding was already underway. Anglo American will sell its 16.8 per cent interest, with a company spokesman telling Dow Jones Newswires that the operation was no longer of a sufficient scale to suit its investment strategy. A similar point is made by Rio Tinto in its statement. Palabora currently has an overall market capitalisation of $US945.4 million and reportedly accounted for eight per cent of Rio's mined copper production in the first half of 2011. The miner said that the project has a current mine life until early 2016, with studies underway for a potential extension of the mine's life to 2030.

QR National, Reliance Rail  

QR National has taken a significant step in beefing up its coal haulage capacity after sealing a $900 million deal with a consortium of coal miners to build an export terminal at the Gladstone liquified natural gas project in Queensland. The Wiggins Island rail project will be constructed by QR subsidiary QR Network, after an agreement was reached with Xstrata Coal, Aquila Resources, Northern Energy Corporation, Wesfarmers Curragh and Cockatoo Coal. The project will deliver a further 27 million tonnes a year for QR National and expand its haulage capacity by more than 70 million tonnes. The announcement comes at a great time for QR National's boss Lance Hockridge, who is currently meeting with North American investors as part of the coal hauler's post-results overseas roadshow. This is the first major rail infrastructure investment by QR National as a privatised entity and that's a point that Hockridge would like to impress upon the investors. Construction on the project is due to begin in early 2012, with railings scheduled for mid-2014. All remaining work is due for completion by March 2015.

Wrapping up

Foster's is likely to find out by the end of the week whether it needs to provide more clarification on its results statements, with the Takeovers Panel appointing a three-person committee to assess the complaints raised by the brewer's seemingly agitated suitor SABMiller. The entire affair looks like a sideshow designed by SAB to get the Foster's board to talk turkey with regards to what is a palatable bid price and that's an issue that may take some time to be resolved. Meanwhile, Fairfax Media is reportedly inching closer to selling its radio assets with The Australian reporting that the media company is hoping to complete a sale by the end of the month. The paper adds that John Singleton's Macquarie Radio Network is widely seen as the frontrunner to buy the leading stations – 3AW, 2UE, 6PR – from Fairfax's portfolio. In other news, Queensland Investment Corporation is set to farewell its chief and legendary fund manager Doug McTaggart next year. McTaggart, who has been at the helm of QIC for the last 14 years, is set to step down on June 30, 2012. QIC is the fourth largest institutional fund manager in the country, with $60.2 billion in funds under management. Elsewhere, Newcrest Mining has appointed former BHP Billiton accounting expert and its current head of human resources, Gerard Bond, as finance director. Bond will take the seat of Greg Robinson who took on the CEO mantle at Newcrest after the departure of Ian Smith in July.