BREAKFAST DEALS: Medibank melee

Chatter about how Medibank Private could be floated is building as everyone in Canberra jostles over its ownership future. Today is the day Sundance Resources has the freedom to say goodbye to Hanlong Mining once and for all, while Billabong remains locked in negotiations with its bidders. And Nathan Tinkler is trying to sell his horse racing empire again.

Medibank Private

Speculation about the future of Medibank Private is increasing as both sides of politics confirm very little has changed about their stances on the government-owned health insurer. The defining factor is the approaching election date.

Federal Opposition Leader Tony Abbott confirmed the Coalition’s policy to sell Medibank, thought to be worth $4 billion in 2010, remains.

“We committed before the last election to the privatisation of Medibank,” Mr Abbott said in Sydney after meeting with retirees and older workers.

“We think that private health insurance is a competitive market. We don’t see any reason in principle why you still need to have a government-owned health insurer.”

Finance Minister Penny Wong reiterated the government’s position on behalf of Labor.

“The government does not have any plans to privatise Medibank Private,” Senator Wong said. It never has.

So, nothing has changed? Well, the Greens have indicated some highly qualified support for the proposal. That’s something at least.

This idea has been around ever since the domestic health insurance market started becoming competitive. The Howard government had considered the idea, but put it aside in 2006.

The reason why the chatter is increasing is because we’re getting closer to the election where the ‘no-deal’ party will be replaced by the ‘deal’ party. That’s it.

But the current speculation about the structure of a Medibank sale, an important issue for investment banks hoping to win an advisory gig, is missing a crucial point. Labor would have to lose power in the Senate, an unlikely scenario, for the Coalition to get its way no questions asked.

If you look back at the Telstra Corporation privatisation, it probably reveals some clues about where this will end up.

The Howard government privatised Telstra in three offerings. The third instalment, dubbed T3, was only launched in October 2006, just over a year before the Coalition was ejected.

Even with a majority in the Senate there were doubts at the time that the Coalition would proceed with the final sale because of unease in the electorate.

Granted, Telstra is a much bigger deal than Medibank in terms of scale. The telco’s market cap is $56 billion.

But the political bargain is identical – maintaining ownership while the public gets a chance to warm to the idea of a privately owned company that was once a public entity.

Then again, Labor could win the election. Any takers for that bet?

Sundance Resources, Sichuan Hanlong Mining

African-focused iron ore player Sundance Resources is expected to finally kill takeover talks with Sichuan Hanlong Mining, perhaps as soon as this morning, with no further word emerging about the fate of its bidder’s chairman.

Sundance and Hanlong have been in discussions for five business days, as per the scheme of arrangement of its $1.3 billion offer, after Hanlong failed to secure a credit approved term-sheet from China Development Bank and China Everbright Bank by a deadline that expired last week.

Hanlong’s chairman Liu Han has been detained in relation to accusations that he harboured a fugitive linked to a triple murder. The fugitive is said to be his brother.

All this is largely coming out of China’s state-owned media and there have been no further developments since Hanlong missed its last deadline.

Talk is now turning to where Sundance will reach out for an alternative. A state-owned Chinese player is the most logical plan B.

Glencore International has been named as a possible alternative. The undeveloped Mbalam iron ore project that straddles the border between the Republic of Congo and Cameroon isn’t exactly in Glencore’s wheelhouse, but it certainly has the financial firepower to get it done.

Either way, we’re just waiting for the likely first step – that Hanlong is officially ruled out.

Billabong International, Paul Naude, Sycamore Partners, VF Corporation, Altamont Capital Partners

Billabong International investors are in a holding pattern as they continue to wait for negotiations with the two bidding consortiums to reach a climax.

The word is that former director Paul Naude and co-bidder Sycamore Partners, both based in the US, are favourites to win the board’s approval over competing consortium VF Corporation and Altamont Capital Partners.

What’s certain is that the ticket price will be lower than the indicative $1.10 a share two bidders nominated when they first popped up. The Australian believes it’s likely to be less than $1.00. The Australian Financial Review says it’s thought that the final number will be under 80 cents a share.

Negotiations between the parties are continuing as Billabong tries to get the best deal it can. If it can secure a binding outcome, it will have to present it to shareholders.

If the deal falls apart, who knows how far the share price could fall.

Nathan Tinkler, Patinack Farm, Whitehaven Coal

Debt-laden coal tycoon Nathan Tinkler is putting his horse racing business up for sale, for what is thought to be the second time, as the value of his Whitehaven Coal stake continues to dwindle.

Tinkler’s Hunter Sports Group is trying to offload its Patinack Farm business, hoping to get something around $200 million.

It was reported in August last year that Tinkler tried to sell the business to Sheikh Fahad al-Thani, who’s a member of the Qatari royal family and owner of Melbourne Cup winner Dunaden, for $200 million. The Sheikh apparently wasn’t impressed.

That serves as a reminder of how long there have been question marks over Tinkler’s 19.4 per cent in Whitehaven Coal.

Back then, Whitehaven Coal’s market cap was $3.7 billion and Tinkler’s stake was worth over $700 million against his reported debts of the same amount.

Whitehaven is now worth $2.06 billion and Tinkler’s share is worth about $400 million.

Wrapping up

AustralianSuper has reportedly received threats of legal proceedings from a major London-based hedge fund if it continues its own legal action against the Future Fund over the $2 billion deal with Australian Infrastructure Fund.

The Australian Financial Review understands that the super fund hasn’t replied to the letter. The primary argument is apparently that the hedge fund is concerned AIX mightn’t distribute the proceeds of the deal in full if AustralianSuper continues.

And finally, ASX-listed New Zealand insurer Tower has sold its investment arm to investment manager Fisher Funds for $NZ79 million ($63.5 million). The business has been on the chopping block since September when the company announced it was subject to a strategic review.