News Corp billionaire Rupert Murdoch looks to be moving on a New York sports channel that broadcasts local Yankees and Nets games. GrainCorp has received widespread support for its decision to reject advanced from Archer Daniels Midland. Elsewhere, Seven Group billionaire Kerry Stokes won’t get a Coates Hire float after all, instead opting for a trade sale. And finally, what’s this about Fortescue Metals Group going into Australian shale?
News Corp, YES Network
As media mogul Rupert Murdoch took the stage at New York’s Sheraton Hotel for the 2012 Benefit Dinner of the American Australian Association, his global media empire was inching closer to announcing yet another cable deal.
According to Reuters, News Corp is tipped to reveal sometime this week that it has secured a minority stake in YES Network, which is a New York-focused sports channel known for broadcasting games for the New York Yankees and the Brooklyn Nets.
Reuters sources indicate News, the parent company is this website, will pick up portions of the stakes in YES held by Goldman Sachs and Providence Capital. It will ultimately amount to a minority stake in the network, with Goldman and Providence staying in.
It’s not clear how much the deal is worth. The report says that YES could be valued at $US3 billion all up.
The Yankees obviously need no introduction, they’re one of the world’s greatest ever sporting enterprises.
The Brooklyn Nets however are a different story. Their history can be described as that of a wanderer, having based themselves in a few locations since their founding in 1967 as the structure of America’s basketball leagues has evolved.
But in 2012, the Nets were moved to the New York borough of Brooklyn where renowned rapper Jay-Z launched the team with much fanfare at the new Barclays Centre.
Brooklyn’s once rough reputation is quickly being replaced as popular areas like Williamsburg and Park Slope become increasingly gentrified.
The local African American population in particular has rallied around the Nets, thanks in no small way to the promotion from Jay-Z, who also owns a minority stake in the team and heads its promotion efforts.
The Nets are expected to sell out games consistently, which is a very useful barometer for the ratings that YES will generate.
The report says that Murdoch’s son James, News deputy chief operating officer, was involved in the negotiations.
GrainCorp, Archer Daniels Midland
GrainCorp chief executive Alison Watkins was solid yesterday reassuring investors that the board was correct to rebuff US crop giant Archer Daniels Midland and its $2.7 billion. The line is that the proposal "materially undervalues” the target.
The share price barely moved afterwards, closing at $12.20. Thanks to the attention from ADM, the register believes the company is worth a lot more than when even the improved $11.75 offer was proposed and even if a deal doesn’t emerge, GrainCorp has a bright future ahead of it.
GrainCorp booked a $205 million profit for 2011-12, well up on last year’s $110 million, and also increased its dividend. GrainCorp’s advisers Credit Suisse and Greenhill have it pretty easy. Those numbers are the defence strategy.
Watkins said GrainCorp is "a very attractive company and absolutely in compliance with our listing obligations,” adding that the company is "not in the mindset” of selling.
For more on how effective Watkins was yesterday, check out this morning’s edition of The Distillery.
So what can ADM do now?
ADM has 14.9 per cent of the register via equity swap arrangements with some investment banks. It’s the maximum allowable under the Foreign Investment Review Board (FIRB) and unwinding those positions would in all likelihood take some heat out of the stock.
The line that ADM is using is that the offer "remains attractive,” which, as The Australian’s M&A master Bryan Firth explains, really means that ADM "remains interested”.
There was a lot of information from GrainCorp management yesterday and it’s likely that ADM will sit down with its advisers Citigroup and Barclays to plan its next move.
But the takeaway from yesterday is that GrainCorp clearly has the upper hand in this play and that ADM must improve its offer if it’s to have any chance of getting cushy up to the directors.
Seven Group, The Carlyle Group, Coates Hire, Caterpillar
Seven Group billionaire Kerry Stokes and private equity giant The Carlyle Group have given up on reported plans to float equipment hire company Coates Hire on the ASX. Instead, they’re looking at a potential sale.
Seven chief executive Peter Gammell announced yesterday at the company’s annual general meeting that it would take several months for investment bank Goldman Sachs to seal a deal for the two owners.
It’s widely expected that Goldman will be looking for Asian buyers interested in taking Coates Hire as a window into the Australian resources sector. It’s a mining services play of sorts.
The Australian Financial Review reports the pair will seek upwards of $3 billion for Coates, which gives you an idea of why they opted not to float the business. Equity markets aren’t particularly supportive at the moment. In fact they haven’t been for a long time.
It’s also emerged that Seven will use some of the $491 million from the sale of Stokes’ stake in Consolidated Media Holdings to pay down debt. If Coates can be offloaded, it’ll be a great boost for Stokes to further mend his company’s balance sheet and perhaps look towards another acquisition.
But first, it’s over to Goldman Sachs to talk to suitors about possible sale structures.
Fortescue Metals Group, Oil Basins
Hasn’t the mood changed something fierce at Fortescue Metals Group?
The company founded by Andrew Forrest was only months ago staring at speculation that it would be forced into big infrastructure sales thanks to a plunging iron ore price.
Now it’s moving into Australian shale gas.
Fortescue announced yesterday that it’s close to picking up an 18 per cent stake in Australian gas hopeful Oil Basins. The company is examining the Canning Basin, thought to be one of this country’s greatest domestic sources of shale.
This isn’t so much a diversification when it comes to produce, but a move by Fortescue to minimise its gas and oil costs as its production expansion becomes increasingly energy intensive.
The $4.2 million investment is rounding error for a company the size of Fortescue. But if there’s one thing we know about Forrest, he never does anything by halves.
This column is expecting more deals along this line from the third force in iron ore. And incidentally, that’s a phrase that Oil Basins pinched for its release, describing its goal to be the "new third force” in Canning Basin exploration and development.
New South Wales Treasurer Mike Baird officially announced the $3 billion sale of the state’s electricity generators yesterday.
Talks will now begin with Origin Energy and TRUenergy about the possible sale of Eraring Energy and Delta West.
Meanwhile, BlueScope Steel has reportedly assured shareholders that it has plans ready to go in the event that a rival steelmaker Arrium is taken out.
Arrium has been the subject of attention from Asian consortium Steelmakers Australia and it’s not much of a stretch to see BlueScope as the next potential target.
According to The Australian, BlueScope chairman Graham Kraehe said, "We've got a number of strategies we monitor, and continue to monitor, in that space.”
And finally, China’s New Hope Group could be one of the players still examining the sale of chicken giant Ingham Enterprises, The Australian Financial Review reports.