BREAKFAST DEALS: Nine networking

A new suitor emerges for CVC's Nine Entertainment, while an analyst envisions an Emirates-Qantas partnership.

Another takeover hopeful has emerged from the woodwork for CVC Asia Pacific’s Nine Entertainment, this time it’s a major private equity group. Meanwhile, Qantas Airways could attract some international attention for its decision to split its business divisions – Emirates is looming largest here. Elsewhere, Macquarie Bank is urging Coalworks shareholders to get rid of the two men at the top as Whitehaven looms, Atlas Iron is feeling a bit vulnerable with commodity prices easing and Australia will boost some of the nerdiest bling in the world after securing a joint role with South Africa on the Square Kilometre Array (SKA) project.

CVC Asia Pacific, Nine Entertainment, Blackstone Group

The latest twist in the tail of CVC Asia Pacific and its battle to save Nine Entertainment from the clutches of US hedge funds has taken us to the house of private equity giant, Blackstone Group. The Australian Financial Review reports that Blackstone has "emerged as a suitor” for Nine, adding that Time Warner, The Walt Disney Company and News Corp’s Chase Carey met with the TV network’s chief executive David Gyngell during his trip to the US. It’s been previously reported that Fairfax Media has had a look at Nine, something that could produce some fantastic reactions from billionaire and boardroom aspirant Gina Rinehart.

The newspaper adds that the private equity company’s debt arm GSO has talked to CVC about taking a lead role of a group to raise $1 billion for the debt-laden company. CVC needs to find a way to deal with $2.8 billion in debt due in February next year and another $1 billion in mezzanine debt with Goldman Sachs 12 months later. The company has considered asset sales, but nowhere near enough to cover that gap. A new debt deal could help bridge the gap.

Qantas Airways, Emirates

Qantas Airways could attract Middle Eastern airline Emirates to invest directly in its domestic operations now that the Australian carrier has split it from the loss-making international arm. That’s the opinion of Deutsche Bank analyst Cameron McDonald at least, who concludes that such a move would give Emirates a direct interest in a healthy feeder market through the dominant player.

It’ll be interesting to see how these overtones shape the debate about Qantas’ foreign investment review cap in Canberra. At present, Qantas is famously unable to accept foreign investments above 49 per cent of its register, while rival Virgin Australia has split its international business into a separate, unlisted entity to attract more international dollars. Some have interpreted this latest move by Qantas as chief executive Alan Joyce playing catch-up to his rival at Virgin, John Borghetti. Joyce says this move isn’t Qantas playing copycat with Virgin and that an unlisted international spinoff is not on the cards.

Coalworks, Macquarie Bank

Macquarie Bank is keeping the pressure on the Coalworks board, specifically its chairman and chief executive, as Whitehaven Coal looms with a $172 million takeover offer. According to media reports, Macquarie has written to shareholders urging them to get rid of chairman Wayne Mitchell and company boss Andrew Firek when they sit down to vote on June 15. As expected Macquarie expanded on its concerns that, in its opinion, the share issue to Hong Kong’s Noble Group was too cheap and lacked transparency and proper process.

Macquarie owns 7.4 per cent of Coalworks and wasn’t too pleased when Coalworks issued shares to Noble at 78 cents. This doesn’t look like a great deal for the remaining shareholders once you consider the $1.00 a share that Whitehaven has put on the table for the company. In its letter, Macquarie has further questioned the decision to appoint Noble as a strategic adviser without a competitive tender process.

Atlas Iron

Junior iron ore miner Atlas Iron has reportedly expressed concerns that a massive share price slump has left it vulnerable to suitors. According to The Australian, managing director Ken Brinsden says the company’s broadly held register and 28 per cent share plunge this month make a successful, opportunistic, lowball offer from a larger competitor more likely. BHP Billiton and Fortescue Metals Group have some pretty compelling cases to take Atlas Iron, mainly because of the target’s allocations at Port Hedland.

The speculation around Atlas demonstrates that it’s the smaller miners that have the most to lose as heat comes out of commodity prices. Atlas shares are now at a 21-month low, but Fortescue is at levels seen just before the turn of the year.

Minemakers, UCL Resources

New Minemakers chief executive Cliff Lawrenson has tried to take the heat out of his company’s battle with UCL Resources over control of the Sandpiper phosphate project. In a letter to Minemakers shareholders Lawrenson said both companies had behaved in ways "which may have been an impediment to reaching an agreed deal and successfully achieving mutually beneficial outcomes for all shareholders”.

Indeed it might be the case that the boards of both companies haven’t been serving their shareholders by aggressively launching takeover offers at each other, with both sides unwilling to yield control of the $400 million project in Namibia. The Australian Financial Review reports that Lawrenson’s comments come after his counterpart at UCL, Chris Jordinson, hosted him in the southwest African nation.

PMP, ACP Magazines

Printing company PMP has extended its deal with fellow takeover target ACP Magazines. In a statement to the market on Friday, PMP said it has signed a longer-term agreement with ACP to keep printing its magazines on mutually agreeable terms. The printer gave no further details about the deal itself.

The two teams are sticking together in tough times it seems. Ticking and labelling company TMA was named last week as the suitor for PMP with an offer of up to $253 million. The PMP share price was trading at a massive discount to the offer before the suitor was outed. Once shareholders can see for themselves the logic of a deal, they can better calculate the odds.

ACP is also under a bucket of speculation. As mentioned above, its parent company Nine Entertainment has its issues. ACP is one of the wings that Nine’s private equity owners CVC Asia Pacific have put up as a potential sale candidate. At first it was thought that Kerry Stokes’ Seven West Media would be the most likely candidate. However, Seven’s share price has lost 22 per cent since April 17, which could mean the register – admittedly dominated by Stokes – mightn’t have quite the appetite for expanding its magazine division.

Square Kilometre Array (SKA)

Australia will get a slice in scientific history by sharing the construction of the world’s most sensitive telescope split with South Africa. The two countries were competing against each other for the Square Kilometre Array (SKA) contract but the first phase of the project, which is about 10 per cent, will be split between the two to keep costs to a minimum. Concerns have been raised about whether that will make the project more expensive in the long run; South Africa was widely perceived to be favourite to win the contract outright. For now, stargazers around Australia are celebrating.

The project is a series of satellite dishes – South Africa will probably get the cooler, higher frequency ones – that act as one unit. In fact it’s planned there will be about 3000 dishes that will cost about $25 billion to maintain over 50 years.

There are many reasons why this deal is special, but here are two. At present current technology allows us to see certain details in space from a limited distance. It’s thought that SKA will be able to detect a radio frequency from 50 million light years away – which is a bit more than a day’s drive, even in a Torana. Additionally, the presence of such mind-bending equipment will prove to be a magnet for brilliant minds and ideas (nerds, and this columnist welcome them).

Wrapping up

OZ Minerals boss Terry Burgess has stressed that shareholders must be patient with the deployment of its $1 billion warchest. According to Fairfax, Burgess has conceded that questions about how it will spend the money have contributed to some of the downward pressure on the share price, but added: "In the end it's better not to do something, than do something that is going to destroy value.”

Turning to finance, Fairfax also reports that Australia’s big four banks are staring at write-downs in the vicinity of $250 million after the collapse of Hastie Group. ANZ Bank is apparently lead lender for a group of banks that includes the other three majors, as well as Bank of Scotland, Ulster Bank, HSBC Australia and HSBC Middle East.

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