BREAKFAST DEALS: Nine's big knock

The world's biggest private equity group comes knocking at Nine, while Darrell Lea's administrator reports good progress.

The rumour mill has Nine entertaining a potential offer from a Hollywood mogul and a private equity giant. Meanwhile, Darrell Lea has good news for its creditors and APA Group finds new ammunition in its battle for Hastings Diversified Utilities Fund.

Nine Entertainment, TPG

Another week, another rumoured suitor for Nine Entertainment – although this one certainly packs a punch.

TPG, the world's largest private equity group, has agreed to back Hollywood mogul Harry Sloan in what could become a $3 billion tilt at the debt-saddled Nine, according to The Australian Financial Review.

The newspaper reports that TPG managing partner Ben Gray was in Sydney this week to hold talks with Nine chief David Gyngell and other senior management. But the powerful Sloan-TPG partnership is still considering whether to make a formal bid.

If the deal does go through, it would be TPG's most high-profile splash in Australia since its controversial $2.3 billion sale of department store chain Myer in 2009. Investors here still have sore memories of that – the share price has fallen more than 50 per cent from its $4.10 issue – and the Australian Tax Office is also fighting the private equity group for $739 million in taxes linked to the float.

For Nine and its private equity owner CVC Asia Pacific, however, the interest will be welcome. The broadcaster is edging closer to a February 2013 deadline to pay back $2.8 billion in senior debt to banks and hedge funds, and it owes an additional $1 billion to second-tier lenders.

Sloan, who would buy Nine with his Nasdaq-listed company, Global Eagle, is said to be considering a $3 billion offer — although CVC isn't happy with the valuation.

To be sure, Nine has some valuable assets – News Corporation and Telstra are also rumoured to have taken a peek, although the latter maintains it's not looking at acquisitions at the moment – but time is obviously not on its side. Hedge funds led by Oaktree Capital and Apollo Global Management own more than half the entrainment company's senior debt, and they'd love the chance to convert it into equity and take control.
The clock is ticking.

Darrell Lea

As Darrell Lea's administrator Mark Robinson prepares to make his first report to creditors in Sydney today, there are strong signs that he is making good progress in the sales process.

Robinson, of the corporate restructuring group PPB, told staff at Darrell Lea's Sydney factory that he had already received interest from up to 80 potential buyers — including four that had made approaches before the company was places into administration last week – according to The Australian.

He said the company's future would be decided in four weeks, and, due to a jump in sales, there was enough cash on hand to pay staff wages during the sales period.

That's one less liability for a company that is already estimated to owe about $25 million to trade creditors and $32.6 million to asset-holding company DLN.

Stay tuned for the full details from Robinson this afternoon.

APA Group, Hastings Diversified Utilities Fund, Pipelines Australia

There is increased speculation that APA Group will sweeten its $1.12 billion takeover bid for Hastings Diversified Utilities Fund, after the Australian Competition and Consumer Commission gave the suitor conditional approval to proceed.

APA is, of course, competing with a rival $1.25 billion offer from Pipeline Partners Australia.

As part of the ACCC's clearance, APA would be forced to sell HDF's valuable Moomba-to-Adelaide pipeline – although that could be what gets the bidder over the line. UBS estimates that the asset could fetch $400 million, which would allow APA to raise its offer to $2.60 per security, compared to PPA's $2.325-a-share bid.

Otherwise, APA could choose to sit back and accept the $250 million it would receive from PPA for its existing 20 per cent stake in HDF – that's a tidy $100 million profit.
For now, APA says its considering it's options.

Whitehaven Coal

Whitehaven Coal's management has gone into overdrive talking up Nathan Tinkler's ability to fund his proposed $5.25 billion takeover of the miner, and investors appear to be taking notice.

Whitehaven chief Tony Haggarty met with investors yesterday to allay fears about the deal's financing, according to The Australian FInancial Review. Separately, the company's chairman, Mark Vaile, told the newspaper "never [to] underestimate Nathan’s ability to put these deals together".

The problem is a $900 million hole in support for the deal. A block representing 48.3 per cent of Whitehaven's register has agreed to roll their scrip into the privatised entity, but Tinkler needs another 16.7 per cent to follow suit.

In his meetings at UBS's offices yesterday, Heggarty is said to have alluded to a verbal indication from Tinkler's current backers that other equity investors were ready to step in to cover the 16.7 per cent void, according to The Australian Financial Review.

Three of Tinkler's advisors, Barclays Capital, JP Morgan and UBS, have also committed more than $2.25 billion of debt financing, subject to due diligence.

Whitehaven shares jumped 19 cents to $4.04 on Thursday, following two days of declines. That's still well below Tinkler's offer of $5.30 a share, but it's a start.

Wrapping up

There are fresh deal rumours surrounding Fortescue Metals Group's Solomon iron ore project in Western Australia, following revelations that a $600 million cost blowout there might force the miner to tap debt markets.

Now sources tell Dow Jones Newswires that Fortescue has put up for sale a power station being built for the project, although there's no indication of the asking price.

The miner is said to have hired Macquarie Bank to sell the plant.

Meanwhile, more details are trickling out about the planned float of logistics group McAleese.

Sources tell The Australian that McAlesse, which is being advised by JP Morgan and Credit Suisse, could have a market capitalisation of more than $1 billion. That's based on a six times multiple on earnings before interest, tax, depreciation and amortisation of $180 million.

In other IPO news, RBS Morgans has won a piece of TRUenergy's potential $3 billion float, which could be the biggest since QR National's listing in 2010.

The Brisbane-based broker has been tapped to provide advice on the retail part of the offer – typically between 10 to 20 per cent of the funds raised in a float – after it was involved in the QR National deal nearly two years ago, according to The Australian Financial Review.

It's should be stressed that it's still early days for TRUenergy and CLP Group, its Hong Kong-listed owner, which is yet to clear the float. But if it does, RBS could be in a good position to also score a job as co-lead manager alongside Bank of America-Merrill Lynch, Deutsche Bank and UBS.


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