BREAKFAST DEALS: Media money

A pair of analysts has joined the chorus of calls that Seven West Media needs to raise capital, a particularly pertinent issue to Kerry Stokes' intentions with Consolidated Media Holdings and, less directly, Foxtel. Also in media, Ten Network is reportedly close to putting pen to paper on its sale of EYE Corp after extensive negotiations. Elsewhere, Hastings Diversified Utilities Fund apparently has a binding proposal on the table, DuluxGroup has a bit more of Alesco Corporation as its deadline approaches, but iiNet is not the subject of a looming takeover offer as yet.

Seven West Media

Seven West Media shares were hit hard yesterday after two more media analysts backed up the argument that a capital raising is needed.

According to The Australian, Commonwealth Bank media analysts Alice Bennett and Dominique d'Avrincourt told clients that Seven West probably needs to raise between $400 million and $500 million to cut the company's debt ratio.

CBA has previously suggested that a $300 million capital raising would be in order. This new number is in line with the figures Citi analyst Justin Diddams ran a month ago, who has also urged Seven West to raise equity.

A $500 million rights issue would bring Seven's net debt/EBITDA ratio down to about 2.7 times.

The newspaper report brought word from one unnamed executive who described the advertising market in July and August as a "bloodbath”. Last month, Diddams pushed back his timeline for an advertising market recovery until 2014.

Against this backdrop is the desire of billionaire Kerry Stokes, who dominates Seven West, to secure a greater slice of Foxtel via Consolidated Media Holdings.

A bid to rival that $2 billion proposal on the table from News Limited would require a bit of extra cash to say the least.

The latest word from Seven on the matter was from Stokes' right-hand man Peter Gammell, who said the company is "continuing to explore all options” as the consumer watchdog investigates whether it would have a problem with Stokes getting a serious foothold in cable TV.

Ten Network, EYE Corp, oOh!media

In other media news, Ten Network (which some believe raised $200 million last month to get in ahead of Seven) is apparently close to offloading its outdoor advertising business EYE Corp.

Negotiations have been going on for some time after Ten put the unit under "strategic review”. It's been suggested that CHAMP Private Equity's oOh!media has been playing hard-ball on price, while Ten has been reinvigorated by the raising funds, which reduce the need to sell assets at all.

But, according to The Australian Financial Review, an announcement spelling out the sale is tipped to drop by the end of the week, with the potential for a delay until Monday.

What about the price? The AFR says that a price tag of $100 million would be "well received” by the market.

Previous valuations have hit as high as $150 million when APN Outdoor and France's JCDecaux were bidding.

But we'll have to wait and see.

The newspaper says Ten has been advised by UBS, while CHAMP has taken counsel from Redbridge Grant Samuel and Clayton Utz.

Hastings Diversified Utilities Fund, Pipeline Partners Australia, APA Group

If Pipeline Partners Australia (PPA) is bluffing its bid for gas pipeline company Hastings Diversified Utilities Fund (HDF) to get rival suitor APA Group to cough up more, it's doing a pretty good job.

Hastings Funds Management, the responsible entity for HDF, released a statement to the market yesterday saying it had received a "binding proposal” at $2.325 a share from PPA that was "consistent” with a previous proposal.

PPA is a joint venture between Canada's Caisse de dpot et placement du Qubec and Australia's Utilities Trust of Australia, the latter of which is managed by Hastings Funds Management.

The suspicion has always been that Hastings might be propping up a dud bid in order to coax a better offer out of APA Group, which is still sitting at $2.10.

The deadline for PPA's due diligence expired yesterday, hence the release of this binding proposal, the precise nature of which is disputed this morning in The Australian.

Whatever the case, there are competition concerns for APA Group's bid for HDF, which is also a gas pipeline company.

The Australian Competition and Consumer Commission (ACCC) is due to hand down its findings into submissions that APA has made to alleviate any competition concerns on July 19.

Until that date, APA has no real incentive to increase its bid for HDF. It may very well do so to maintain shareholder interest in the stock, but it only has to wait a little over a week.

At that point, we'll probably get a better understanding of whether PPA's higher bid, bluff or not, will ever extract a higher offer from APA.

DuluxGroup, Alesco Corporation

Paints company DuluxGroup has secured almost 30 per cent of the Alesco Corporation register as its $188 million takeover offer drifts closer to its deadline.

Dulux owns about 22 per cent of the register, but institutional acceptances of its $2 a share in cash offer have pushed that figure up to just under 30 per cent.

That $2 offer runs out on Friday and the late movement might give Dulux enough encouragement to sweat it out further with Alesco, rather than increasing the offer or walking away.

One of the conditions of the Dulux offer at present is to receive 90 per cent acceptances.

The Australian reports that speculation is centring on Dimensional Fund Advisors as the party behind the latest commitment to the Dulux offer, which is not binding by the way.

iiNet, TPG Telecom

Sources close to iiNet have played down speculation that substantial shareholder and fellow telco TPG Telecom is planning a bid.

Shares in the company claimed some serious ground between the end of June and the end of the first week of July.

However The Australian brings word from sources close to the company that don't believe TPG's David Teoh is thinking of adding to the 7.24 per cent his company already has in iiNet.

"The move in the market is probably more a (reflection) of the stock being undervalued. IiNet stock is trading on low multiples and has a strong balance sheet, so the market is probably recognising that," a source said, according to the newspaper.

It is curious as to why TPG is holding on to the 7.24 per cent. If Teoh doesn't want another player to come in and snap up iiNet, he doesn't have nearly enough to form a blocking stake.

Darrell Lea

The collapse of an iconic Australian chocolate company has given rise to a slew of headlines that go something like "Rocky road sinks Darrell Lea”.

Now insolvency firm PBB Advisory has been called in to assess how many of the 700 jobs can be saved along with the 69 stores. Breakfast Deals will keep an eye out as to whether there's anyone who can resurrect the company.

Wrap up

Speaking of troubled times, timber company Gunns has run into taxman troubles at precisely the wrong time, according to Morningstar's Peter Warnes.

As Gunns tries to get its fiscal house in order, a long and drawn out battle, The Australian reports comments from Warnes who says the company is barely equipped to deal with an unexpected $64 million slug from the Australian Taxation Office (ATO).

In happier matters, Insurance Australia Group chief executive Mike Wilkins has his eye on a foothold in Indonesia to complete the insurer's Asian portfolio.

"The Asian opportunity is here and now,” Wilkins said. "Over the past couple of years, we've quietly gone about our Asian strategy and are now getting real traction.”

Wilkins has to tread carefully with a register finely attuned to poor foreign investments, thanks to his predecessor's unfortunately timed tilt at the UK market. We'll also keep an eye on this move.

And finally, Brisbane's AP Eagers has forked out $88.4 million to become the latest shareholder in Automotive Holdings Group, an industry rival.