Nine Entertainment’s new owners are reportedly thinking more about an IPO with a Southern Cross Media merger seemingly petering out. Rio Tinto is talking tough about cost cuts and asset sales as the boss of rival BHP Billiton sells a similarly frugal message. Elsewhere, Telstra has picked up a big contract with the Department of Defence, while Geoff Dixon and Mark Carnegie have swapped agitating Qantas to buying up more pubs.
Nine Entertainment, Oaktree Capital, Apollo Global Management
Nine Entertainment has only officially been under the control of its new hedge fund owners for a few months, but already the plans for a possible $3 billion IPO are being more closely examined.
The Australian Financial Review believes that Nine has received six pitches from investment banks hoping to secure a mandate for a float.
While the report doesn’t specifically state that Nine had sought these pitches, the newspaper reports that one source says the float consideration had been brought forward because of a likely end to merger talks with Southern Cross Media.
In mid-December, court documents from Nine’s new owners indicated the float was on the agenda for some time in the following 18 months, which would put an IPO as late as mid-2014.
If the float plans develop, it’ll be interesting to see whether any of Nine’s new owners stay on the register to collect a media sector rebound.
The top brass at Australia’s top two miners are continuing their cost cutting drive, with asset sales near the top of the agenda.
While everyone’s talking about BHP Billiton’s incoming chief executive Andrew Mackenzie (check out this morning’s edition of The Distillery for a sample), who unveiled the miner’s new team yesterday amid a growing emphasis on a leaner mining giant, his counterpart at Rio Tinto was in London showing his hand.
Rio boss Sam Walsh told investors that the company will keep its eye on selling non-core assets as it attempts to save $US5 billion ($4.8 billion) through to 2014.
That’s a lot of money. For those keeping score, Deutsche Bank analyst Paul Young put Rio down for $US10 billion worth of assets that it can offload over the next three years (see BREAKFAST DEALS: Coal crunch, March 12). The $US5 billion is a combination of cost cutting and asset sales, so we’re still a way off that $US10 billion.
Young put BHP down for $US25 billion.
The executives wouldn’t be drawn on what assets will be sold off, but it’s a safe bet that aluminium will be one of them.
Since the global financial crisis, Rio has been trying to deal with its disastrous acquisition of Alcan, done in mid-2007 as part of a defence from BHP Billiton.
The rival mining house eventually put up a rival offer under the watch of soon-to-be-departed chief executive Marius Kloppers, but then walked away because Rio Tinto’s debt burden, taken on to pay for Alcan, was simply too great.
With all well understood by the market for such a long time, it makes the comments from widely respected Rio Tinto chairman Jan du Plessis yesterday somewhat strange.
Du Plessis admitted that the Alcan acquisition was poorly timed. It’d been almost six years, is this a history exercise?
"In retrospect, we therefore have to acknowledge that the acquisition has had a significant negative impact on shareholder value and, as our owners, you have every right to expect that we do better," he said.
One assumes that du Plessis is trying to instil some positive sentiment on the register, assuring them that when these asset sales come through, the proceeds won’t be blown on some half-cocked idea.
Telstra Corporation, Department of Defence
Telstra Corporation has picked up a six-and-a-half-year, $1.1 billion contract with the Department of Defence to help integrate its fixed telco infrastructure with its satellite and tactical networks.
Chief executive David Thodey said it’s the largest customer undertaking in the telco’s history.
“The use of technology such as unified communications, advanced video conferencing as well as tablet and smartphone usage, will provide a vital link connecting troops, commanders, bases and allies around the world,” said Thodey.
The defence department’s chief information officer group will partner with Telstra to fulfil the project, with a completion target date set for mid-2016.
Telecommunications has always been a quasi-defence issue in certain circumstances for governments, but with the age of the internet percolating into every facet of developed economies, domestic contractors are looked upon much more favourably.
The exclusion of Huawei from the national broadband network is indicative of the opposite spectrum for government projects considered to be sensitive in regards to national security.
Huawei is running into similar problems in the US, with government figures cautious about embracing a Chinese operator.
Speaking of China, The Australian reports that Sino Australia Oil & Gas is looking to raise up to $20 million in a raising on the Australian Stock Exchange.
Former Qantas Airways boss Geoff Dixon and activist investor Mark Carnegie have added to their Australian Pub Fund by picking up Brisbane’s Elephant & Wheelbarrow Hotel from Adelaide’s Independent Pub Group.
The Australian reports that the pub is worth between $27 million and $29 million.
Not a bad way to recoup after an unsuccessful campaign against Qantas.
APN News & Media has offloaded its newspaper businesses in Christchurch and Oamaru to independent publisher Mainland Press.
The duel-listed company didn’t tell investors how much it had sold The Star and The Oamaru Mail for.
“The decision to sell was based on our determination to concentrate our efforts on the North Island where most of our businesses are located and where most of New Zealand’s growth would occur in the next decade,” said managing director Martin Simons.
Staying with media, The Australian Financial Review reports that billionaire Melbourne fund manager Alex Waislitz has been quietly building a stake in Fairfax Media since late last year.
Cattle company Australian Agricultural Company will offload two of its properties in southern and central Queensland called Brighton Downs and Adelong, totalling a combined 425,200 hectares, most of which comes from the former.
And finally, the Australian government has sold another $1 billion in Treasury notes, with this batch maturing on July 26 this year.
The weighted average yield came in at just 2.8441 per cent, with a coverage ratio of 5.54. Investors just can’t get enough of them.