BREAKFAST DEALS: NAB knock

The British banking sector is in a dire state as the Coalition government there tries desperately to drag the underperforming economy out of its funk while making headway into the UK's sizable debt levels. It's a bad time to be selling the UK; it's been that way for some time. Moody's has just downgraded National Australia Bank's Clydesdale arm as Cameron Clyne contemplates an exit from the country through his "review” of its operations. That isn't to say that Clydesdale's position has weakened, it's just to emphasise that its position would be even worse without a foreign bank with deep pockets to keep it healthy. Meanwhile, Virgin Australia has excited the market with its unlisted international spin-off idea. Elsewhere, Telstra has finally handed over the final structural separation signatures to the ACCC, Amcor has hit an ACCC hurdle on the way to Aperio and Origin might sell another stake in the APLNG project to get a second train.

National Australia Bank, Clydesdale, Yorkshire Bank

National Australia Bank chief executive Cameron Clyne already has enough people trying to get into his ear to urge him to consign his bank's ill-fated foray into the UK to the history books. But what's the harm in one more? Credit ratings agency Moody's has cautioned that it might downgrade Clydesdale as NAB is "reviewing” the operations and it comes only a few months after the ratings agency downgraded those same assets.

NAB announced the review last month and it's been widely interpreted as the first step towards exiting the UK market altogether. The Australian bank has had to prop up its Clydesdale and Yorkshire Bank operations with funding and Moody's is responding to the likelihood that NAB will restructure, scale down or drop the assets for good.

Virgin Australia

Virgin Australia chief executive John Borghetti has frustrated Qantas Airways rival Alan Joyce once again by opening the door to foreign investment. While releasing its half-year results, Virgin announced a proposal to split the company's international operations into a separate, unlisted company that would have a separate board but be funded by Virgin Australia. Existing shareholders would get shares in the new company, but because it would only cover Virgin's flights to New Zealand, South East Asia, the Pacific, Abu Dhabi and the US, it would get around the foreign ownership laws.

The question now is whether Etihad Airways, which has made no secret of its interest in Virgin, will get a spot on the new unlisted company sometime down the track. Borghetti was being coy about the issue yesterday, stating quite simply that the airline was not in talks with Etihad. But this move is clearly orchestrated to encourage foreign investment and Etihad is the most openly interested foreign party.

In other aviation news, Sydney Airport Holdings has struck a deal with Ontario Teachers' Pension Plan that transfers the company's stakes in the Brussels and Copenhagen airports in return for another 10.86 per cent of the Kingsford Smith Airport (Sydney) and $800.7 million.

Telstra Corporation, NBN Co

Telstra Corporation chief executive David Thodey isn't hiding his relief following the long-awaited submission of the telco's revised structural separation, paving the way for an agreement with NBN Co. The last sticking point with the Australian Competition and Consumer Commission was over the topic of whole broadband prices, with the consumer watchdog telling Telstra it wanted to set a price cap on its copper-based services. Telstra wasn't impressed, but has ultimately relented – $11 billion is just too good to pass up for the price regulation of a service that's going to be extinct.

Or is it? Of course the upheaval in Canberra could deliver anything, but the most consequential in this instance is another election. Assuming that the Coalition gets up – and it would take a brave betting enthusiast to go against that idea – Tony Abbott has repeatedly stated that he wants another deal with Telstra.

Amcor, Aperio

The competition regulator has stopped packaging giant Amcor from wrapping up flexible packaging company Aperio Group, for the moment at least. The ACCC has asked for more industry consultation amid concerns that Amcor would gain a worryingly large chunk of some flexible packaging product line. However, it's thought that Amcor can still secure the target, for a bid said to be in the vicinity of $300 million, by walking the ACCC through the issues.

Origin Energy

Origin Energy hasn't closed the door on selling another stake in its Australia-Pacific liquefied natural gas (APLNG) project in Queensland. Handing down half-year results yesterday that included a $794 million profit, aided by the integration of its recently acquired NSW energy assets, Origin executives didn't discount the possibility of selling down its stake in the project to raise a little more funding.

Origin, along with partner ConocoPhillips, reduced their respective stakes in the project from 42 per cent to 37.5 per cent each, allowing Sinopec to increase its stake from 10 per cent to 25 per cent and commit to taking another 4.3 million tonnes of LNG a year for 20 years on top of the 3.3 million it had already committed to.

Origin is currently waiting on Sinopec to secure Chinese and Australian investment approvals. Origin says its well funded for the first phase of the project and to secure the second phase a combination of debt and equity sale could be used. The energy company didn't indicate how much might be sold down, but given that it only parted with 4.5 per cent last time, it's not likely to be a large figure.

What makes M&A sing?

Global management consulting firm Booz & Company says one of the factors that determines whether a merger or acquisition is going to be successful is whether it was pursued with specific strengths and capabilities in mind. In a study called The Capabilities Premium in M&A, Booz & Company analysed 320 transactions worldwide between 2001 and 2009 across eight industry sectors – chemicals, consumer staples, electric utilities, healthcare, industrials, information technology, media, and retail – and calculated the shareholder return for the following two years.

"The study… found that transactions designed to enhance or leverage core capabilities produced an additional 12 percentage points of annual shareholder return on average, compared to deals with limited capabilities fit.” Quite what that means is best explained by highlighting what it doesn't mean. The researchers found that deals designed with cost synergies in mind did not perform as well.

Wrapping up

BHP Billiton has put its Tasmanian manganese alloy plant, which has been in operation for 50 years, under review. The Temco plant, a joint venture with Anglo American, could very well be shut down, ending 330 jobs in the process as a result of the decision, but who knows, maybe the British will buy them out. Meanwhile, Japan's Mitsubishi has sealed a $US280 million ($264 million) deal with Canada's Talismen Energy to pick up a number of natural gas discoveries and prospects around Western Papua New Guinea, a person with knowledge of the matter has told News Limited.

Meanwhile, Australian insurance giant QBE has reportedly missed out on HSBC's Asian property and insurance business, French newspaper Le Figaro reports. Apparently, AXA SA has pipped QBE and Switzerland's Ace Insurance to the post.

And finally, private equity firm Next Capital is understood to have decided to offload its 60 per cent stake in Onsite Rental Group, The Australian Financial Review reports. Apparently Merrill Lynch is managing the auction and could value the entire company at $400 million.