Breakfast Deals: News muscle

No one's completely sure what News Corp's second-largest holder is up to, while Anchorage's Dick Smith purchase now looks like a bargain.

Rupert Murdoch's new-look News Corp has attracted an investor with a giant stake and deep pockets – could it be part of a push to restructure the company when Rupert Murdoch is gone? Elsewhere, Anchorage Capital Partners appears to be the clever dick as it prepares to book a big profit on Dick Smith, while Rio Tinto and the new board at Oyu Tolgoi start talks on financing the next stage of the giant Mongolian copper mine.

Southeastern Asset Management, News Corp

News Corp has a powerful new second-largest shareholder with a history of activism, and nobody's quite sure what it's up to.

Memphis-based Southeastern Asset Management has snapped up a 12 per cent voting stake in News Corp, the global publishing business that was split from Rupert Murdoch's film and television empire in June, according to Bloomberg.

The site says Southeastern bought 23.8 million Class B, or voting, shares in News Corp, valued at $US397 million ($407.4 million) based on a closing price of $US16.72. The investment accounts for about a 4.1 per cent economic interest in the company.

Southeastern's stake wedges the firm between Murdoch, who chairs News Corp and holds about 39 per cent of the voting stock, and Prince Alwaleed Bin Talal, who owns 6.6 per cent.

It's notable that Southeastern is targeting News Corp's voting shares, especially considering the self-described value investor has previously attempted to sway management. 

Most recently, the firm joined US billionaire Carl Icahn's aborted attempt to block the $US24.9 billion buyout of Dell. It also owns a stake in Hochtief, and has supported the German company's moves on Leighton.

For now, the fund says it has no plans to influence News Corp, but that hasn't stopped speculation about what it might do in the future. There have been suggestions the investor may seek a spot on the company's board, or attempt to influence the ownership structure when Murdoch is gone.

At 82, Murdoch has had an iron grip on news for half a century and hasn't faced such a sizeable force on his register since Liberty Media's John Malone used his 19 per cent stake to wrest control of satellite network DirectTV from News Corp a decade ago. 

He and his family will surely watch closely for hints about Southeastern's intentions. 

Anchorage Capital, Dick Smith

Private equity giant Anchorage Capital Partners is preparing to float Dick Smith for more than $500 million less than a year after purchasing the electronics retailer for a fraction of that figure.

Anchorage has tapped Goldman Sachs and Macquarie to explore strategic options, including an initial public offering or trade sale, according to various media reports.

A float could be a real windfall for Anchorage, which bought Dick Smith from Woolworths for $20 million in 2012, then paid another $74 million this year to nix a deal that would have allowed the supermarket operator to collect a proportion of sale proceeds. 

The transaction now looks like a bargain.

Dick Smith's turnaround has been swift. While the private company is not required to reveal earnings, it reported a return to a "decent" profit in August. It also plans to open 30 new stores, and has an exclusive co-branding deal to run David Jones' electronics business. 

The quick sale does beg one major question, though. If the business is so strong, why is Anchorage exiting?

For now, an Anchorage spokesperson tells The Australian Financial Review: "Anchorage is a turnaround focused investment firm, so given the business is now pursuing a growth agenda, and following interest from the investment community, we have commenced working with advisers to evaluate potential options."

You can also expect Woolworths to face some uncomfortable questions about selling the business when it did.

Oyu Tolgoi, Rio Tinto

Rio Tinto executives are preparing to meet the Oyu Tolgoi copper mine's new board in London this week, to kick off finance talks for the mine's second stage, according to The Australian Financial Review.

The news comes as Oyu Tolgoi, majority owned by Rio, elevates the chief marketing officer for Rio Tinto Copper, Craig Kinnell, to president and chief executive of the Mongolian-based mine.

Rio will be hoping Kinnell will be able to help break a deadlock between the Australian miner and the Mongolian government to negotiate a financing deal to fund the next stage of the Oyu Tolgoi underground expansion, which could top $US5 billion ($5.4 billion), the Financial Review says.

The disagreement stems partly from Oyu Tolgoi's difficult ownership structure: Rio holds a 66 per cent stake through its majority-owned Turquoise Hill, with the remainder controlled by Mongolia's state-owned Erdenes Oyu Tolgo. Rio manages the project.

Cadence Capital, Pepper Australia, RHG, Resimac

The Resimac syndicate has slammed Pepper Australia's rival bid for RHG as highly conditional and unfair to the target's shareholders.

Pepper, alongside Cadence Capital, sweetened its offer for the former RAMS business to $158 million, including 36 cents cash and one share in Cadence for every 10 in RHG.

Resimac says its existing offer of 49.5 cents cash, which currently enjoys the support of RHG's board, offers certain value, warning against accepting "very illiquid" Cadence shares.

It also says Cadence – RHG's largest shareholder – would receive preferential treatment for its stock given it can receive 100 per cent cash.

RHG is still assessing Pepper's higher bid.

Wrapping Up

Meanwhile, Qantas Airways has partnered with Western Australia to market the state at home and internationally, following similar deals with New South Wales, Queeensland and the Northern Territory.

Under the $7.7 million WA contract, Qantas will target visitors from the United Kingdom, United States, Singapore and Australia — matching state government's investment dollar for dollar.

The total value of Qantas' joint venture tourism contracts is now $56 million over three years.

Finally, Westfield Group looks set to rake in an additional $225 million from the sale of two more shopping centres in Perth.

Charter Hall has agreed to buy Westfield's Innaloo Shopping Centre and Shoppers Village and the joining Innaloo Mega Centre, a day after it was revealed Westfield and Westfield Trust plan to sell out of the Karrinyup shopping centre, in Perth's north.

The Charter Hall transaction is conditional on the Karrinyup deal closing before Christmas.

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