BREAKFAST DEALS: Nine exposed

Anyone knows that major change at the top of an organisation under siege, whether brought about by personal circumstances or otherwise, is never good. Nine Entertainment boss David Gyngell says chief operating officer and finance director Pat O’Sullivan wants to spend more time with his family and had made that clear for some time. That’s fair enough, but his replacement Simon Kelly is taking an important position as US hedge funds are plotting to seize control of Nine due to the network’s large debt burden – debt being Kelly’s department. Elsewhere, Spotless Group chairman Peter Smedley might have given Pacific Equity Partners the keys but he hasn’t given away the house. Meanwhile, Hong Kong’s Noble Group is rumoured to have taken a strategic stake in Fortescue Metals Group, while Gunns could have a new partner of its own – though not the kind that would get Bell Bay pulp mill up and running.

Nine Entertainment, CVC Asia Pacific

CVC Asia Pacific have enough on their plate trying to hold on to Nine Entertainment with its $2.7 billion in senior debt without the TV network and publisher’s chief operating officer and finance director, Pat O’Sullivan, reaching for the exit. US hedge funds Apollo Global Management and Oaktree Capital have snapped up more than $1 billion of that debt and have been needling CVC Asia Pacific for a debt-for-equity swap deal, which would largely wipe the current owners out.

O’Sullivan is being replaced by seasoned gaming executive Simon Kelly, a director of Aristocrat Leisure. It’s a good thing the new finance director has an understanding of betting odds because Nine is smack bang in the middle of a high-stakes battle. The debt matures in February next year, so Kelly should prepare himself to work closely with Nine boss David Gyngell – who said O’Sullivan was departing to spend more time with his family – and CVC Asia Pacific to address that awfully large debt burden.

Spotless Group, Pacific Equity Partners

It seems that Spotless Group chairman Peter Smedley has sought to stave off an any attempt by a group of frustrated shareholders to spill the board – about which there’s been a lot of talk but no action – by letting Pacific Equity Partners have a look at the service company’s books. Spotless has granted PEP non-exclusive due diligence, having failed to elicit a higher offer from the private equiteers with its management presentation late last year, but they've also refused to support the current $711 million bid. In order to get the directors on board, the target is still $743 million.

Spotless adds that it has received encouraging correspondence from PEP’s debt financiers and agreed to a 12 month standstill with the group. The standstill means that PEP cannot acquire any Spotless shares unless it wins support of the board, which means a bid of $2.80 a share, or goes for something lower with minimum acceptances of 90 per cent. In the second instance, the bid would have to be no lower than the current $2.68 offer.

Fortescue Metals Group, Noble Group

Fortescue Metals Group founder Andrew Forrest might have largely waved goodbye to one of his first important shareholders, Leucadia National, just last week but things are looking up already. Fortescue shares surged 5.7 per cent yesterday amid speculation that Hong Kong’s Noble Group had secured a strategic stake in the company. Royal Bank of Scotland has been accumulating a stake of 89 million shares for one nominee category in particular and the talk is that it’s Noble. Fortescue shares are now at their highest level since late October.

Remember Nobel is talking to China’s Yanzhou Coal, which is interested in its majority-owned Gloucester Coal, which it could then use to list a significant amount of its assets. Yanzhou is compelled by an agreement with the government to find a way to put some of its footprint on the market thanks to an agreement with the federal government struck in order to acquire Felix Resources for $3.2 billion back in late 2009.

Gunns

Tasmanian timber company Gunns is set to reveal the details of a capital raising and cornerstone investors as early as this morning, with investors wondering how much and who it is. The Australian Financial Review says the white knight is New Zealand-born and now Singapore-based Richard Chandler.

The newspaper believes Chandler, through his company Richard Chandler Corporation, is in final discussions with Gunns to take a 25 per cent to 40 per cent stake, while the company is hoping to raise between $250 million and $350 million to address its $580 million debt burden. The Australian believes that Macquarie is running the capital raising and that no new details are set to emerge about the troublesome Bell Bay pulp mill.

Extract Resources, China Guangdong Nuclear Power Corp

Extract Resources will have to search long and hard to find an alternative value maximising proposal for shareholders from the pending takeover offer set to drop from China Guangdong Nuclear Power Corp. Guangdong has secured 89.5 per cent of Extract’s 43 per cent shareholder, the UK’s Kalahari Minerals, and given the size of the stake in Extract it’s difficult to see the company doing anything except maybe haggling over the ultimate price Guangdong pays.

TRUenergy, CLP Group

Hong Kong’s CLP Group is trying to make sure that its energy retailer TRUenergy has an Australia-friendly image by the time it’s floated. The launch date is likely to fall sometime in the fourth quarter and right now CLP is searching for a high-profile board.

According to The Australian Financial Review, TRUenergy is thinking about going for the brand name Energy Australia, for a company that will still be at least 51 per cent owned by a foreign company. But more tellingly, the newspaper brings word from a source close to the float process that a strong emphasis is being put on a board that’s majority Australian and independent.

Freehills, Herbert Smith

Another Australian law firm merger is on the cards with Freehills reportedly speaking to UK-based Herbert Smith. According to News Limited, a Freehills spokesperson says the firm has been holding "preliminary discussions” with Herbert Smith, which has a footprint that covers Asia, Europe and the Middle East, but no decision has been made so far. This comes on the heels of a Slater & Gordon takeover of another British law firm, Russell Jones & Walker, and Mallesons Stephen & Jacques’ merger with Hong Kong’s King & Wood.

Wrap up

Engineering company Downer EDI has picked up a handy six-year contract worth $570 million with Karara Mining to work on its magnetite iron ore site in Western Australia. Downer’s duties will be to set up the surrounding infrastructure for the mine, as well as take care of waste and ore and provide drill and blast support.

Meanwhile, infrastructure services provider Cardno has picked up US-based ATC Associates for $106 million, which will be funded by a $45 million share placement and a $45 million one-for-nine renounceable rights issue.

And finally, the Australian staff of Royal Bank of Scotland’s investment banking arm have reportedly been told that a deal should be made sometime this week. The Australian Financial Review understands that just a few Asian players are interested in the Asia-Pacific arm.