BREAKFAST DEALS: New coal giant?

Lunch isn't just for wimps. Be sure to check out LUNCH DEALS for more wheels and deals later today.

Could a coal merger be next for iron partners Rio Tinto and BHP Billiton? Also, who could afford $1 billion for Ravensthorpe? Surely the oligarch who is said to own a €500 million villa on the French Rivera. News too on Consolidated Media, Asciano, Kirin and Suntory, plus developments at RBS and China Inc.

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BHP Billiton and Rio Tinto

Australia's mining behemoths BHP Billiton and Rio Tinto could combine their massive Australian coal operations, according to sources who spoke to the Herald Sun. In a response to the implications that a tie-up between rivals Anglo American and Xstrata would bring to the coal industry, BHP and Rio may sign a deal similar to their recent Pilbara iron ore agreement, the newspaper says. If a coal deal does come to be proposed, competition and regulatory hurdles will then have to be jumped. But the speculated deal also begs three other questions: what will be the impact on Australia's worsening relationship with China; what will be the impact on other coal miners in New South Wales and Queensland; and will BHP and Rio just go the whole hog and put their original merger plans back on track? To question one, the answer is that the relationship will probably just get worse. This is not so much because China buys Australian coal (Japan is far and away the biggest market for our biggest export), but because it smacks of a step towards answer three: an eventual Rio/BHP merger – something China vehemently opposes. As for question the second, the impact on other coal miners will no doubt be good. The last time BHP tried to merge with Rio, Xstrata launched takeover offers for Macarthur Coal and Gloucester Coal (the latter is now being acquired by Noble Group), which sent share prices racing. And while synergies between Rio and BHP's operations will put them in pole position to their peers, no doubt miners that stay independent will relish being in the same position as Fortescue Metals Group is in iron ore. Stay tuned.

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Ravensthorpe nickel

Elsewhere in its mineral empire, BHP Billiton has been looking to sell its mothballed Ravensthorpe nickel project in Western Australia for up to $1 billion, according to unnamed sources quoted in the Financial Review. That's a billion times the $1 asking price the market was originally speculating, though such speculation admittedly arose from what was probably a throw-away line by Fat Prophets analyst Gavin Wendt. If that price is true it probably puts Andrew Forrest's Poseidon Nickel, Minara Resources and Heron Resources out of the running. Clive Palmer's Gladstone Pacific Nickel, which recently bought BHP's Yabulu nickel refinery in Queensland, is also unlikely to bid considering its Chinese money-bags, China Metallurgical, no longer has the hots for the metal. That could possibly leave the project to international parties, like France's Eramet, which owns Société Le Nickel in New Caledonia, Vale's Inco, which also operates on the French South Pacific colony, and Norilsk Nickel, the world's biggest nickel producer. Yesterday we mentioned the musings of Russian billionaire Mikhail Prokhorov that he wanted to merge Norilsk and Rusal into a group that would rival BHP. Maybe Ravensthorpe could be a new gulag for his growing archipelago.

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Consolidated Media Holdings

What discussion of billionaires in their early 40s could not segue into James Packer? The gaming and media mogul, whose marriage to model Erica Baxter was conducted near to the €500 million pad on the French Riviera that Mikhail Prokhorov would later reportedly come to own, has done some splashing out of his own, buying another $26.5 million worth of Consolidated Media Holdings shares, increasing his stake by 10 million shares, or 1.45 per cent. Now owning over 40 per cent of the company for the first time, Packer is in a better position to see off rival Kerry Stokes from taking over ConsMedia, which owns assets in Foxtel and Premier Media Group, a cable channel portfolio that includes Fox Sports. Stokes owns 18.3 per cent, while Packer's private vehicle, Consolidated Press Holdings, now holds 40.8 per cent. UBS bought on behalf of Packer, who controversially purchased his initial defensive block of shares before he could satisfy the rule of seeking chairman John Alexander's permission two days prior. As a director of ConsMedia, Packer must obtain permission to trade shares during the company's results black out period: July 1 to August 26.

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Asciano Group

And speaking of controversial director dealings facilitated by UBS, the investment bank has called suggestions that it won its capital raising mandate from Asciano Group on the back of a collar loan deal with its managing director "malicious" and "unequivocally incorrect". Speaking to Fairfax papers, the firm said that the arrangement with Asciano boss Mark Rowsthorn was a "smaller transaction at the end of the deal” and "just us continuing to provide service to our customers." UBS's famous levels of customer service have put it in conflict with the United States government, which is demanding the names of 52,000 American clients with offshore accounts, but it is not really UBS that is raising the ire of Asciano shareholders anyway, it is more that Rowsthorn's full participation in the transport infrastructure group's capital raising was an important inducement for others to get involved. What is particularly interesting is that Rowsthorn effectively loses his blocking stake now that his shareholding has reduced, which could potentially leave Asciano open for a hostile bid. One of the private equity firms involved in Asciano's Lazard-coordinated asset sale process, TPG, is thought to be considering an offer.

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Asian deals

Japanese brewer Kirin has joined Suntory in confirming that it is considering a merger with its rival; a merger that will create one of the world's biggest food and beverage groups and could see other Japanese companies like Asahi and Sapporo make acquisitions in markets like Australia to maintain some kind of parity. For some time Asahi has been tipped to be keen on Foster's Group, with or without the wine division. Elsewhere, Chinese regulators are at an impasse over whether to approve the purchase of General Motors' Hummer by the little-known tractor company Sichuan Tengzhong Heavy Industrial Machinery. While China's economic planner, the National Development and Reform Commission, doesn't like the sound of a provincial upstart making such a prominent acquisition, China's Ministry of Commerce is said to back it. China is in the throws of centralising the M&A activity its state-owned companies are engaged in across the world. The situation is characterised by reports that two Chinese state-owned oil companies are competing for the same assets in Argentina and rumours that Beijing was furious that Hunan Valin did a deal with Fortescue Metals Group ahead of Chinalco.

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Wrapping up

Closer to home, Macquaire analyst Greg Dring has said there is no chance that Woolworths will buy into hardware franchise network Mitre 10 anytime soon. Woolies has otherwise engaged Citigroup to scope out acquisition opportunities in North America. Acquisition opportunities are said to be plenty, but it is unlikely that such bargains will be found as the magazine Business Week, which is apparently on sale for $1. No, that's not the cover price, that's the alleged price that owner McGraw-Hill could get for the entire company, according to the Financial Times. And finally, Royal Bank of Scotland is merging its various investment banking teams across Asia into a single entity. The investment bank is separate from the commercial and retail divisions being sold to the likes of HSBC, Standard Chartered and ANZ. RBS is also undertaking a review of its RBS International offshore services division across Asia and the Middle East. It has already closed its office in Dubai as expats lose their jobs and leave their luxury cars and debts behind in the city's airport parking lot.