BREAKFAST DEALS: Noble intentions

Talk between Gloucester and Yancoal turns to Noble Group, while IAG eyes a tilt at Kurnia Asia.

Given the length of time it took Peabody Energy to get Macarthur Coal into the boat and the many failed attempts by other coal companies to find a willing buyer, the speed at which current deals are taking place is breathtaking. By all reports, Gloucester Coal and Yancoal Australia are in early discussions, but some indications are emerging that an $8 billion merger proposal could be done and dusted before Christmas. Meanwhile, Insurance Australia Group was poised to make a big bid for Malaysia’s Kurnia Asia after all – shareholders will be glad to know they weren’t taken for a ride on this deal. Elsewhere, the Australian M&A sector in 2012 is shaping up as another year for private equity, rumours are starting to seep out of Macquarie Bank over its banking and financial services division, and Alliance Airlines is finally off the ground.

Gloucester Coal, Yancoal Australia, Noble Group

Gloucester Coal and Yancoal Australia are busy trying to get a proposal to create Australia’s largest independent coal producer done in time for Christmas, but they’ll need to instill some cheer into Noble Group above all. Noble holds a 65 per cent stake in the target and usually prefers minority stakes so it’s thought the Hong Kong investment house would be comfortable with a sale at the right price. What that is, we’ll soon find out. According to The Australian, Noble is interested in taking a non-controlling stake in Gloucester’s assets and a pile of cash.

Both Gloucester and Yancoal’s parent company Yanzhou Coal are in trading halts on the Australian Securities Exchange and the Hong Kong Stock Exchange, respectively. Reports indicate that a deal could even be done by the end of the week. Gloucester is getting its advice from Lazard, while Yancoal is being taken care of by UBS and Citi.

Meanwhile, The Australian also reports that Gina Rinehart isn’t sitting on her hands after settling GVK Power and Infrastructure down for a $1.2 billion deal. Rinehart has reportedly taken an estimated $3 million in positions on Mongolian explorers Aspire Mining and Guildford Coal.

Insurance Australia Group

It turns out Insurance Australia Group chief executive Mike Wilkins is quite a multi-tasker. Last week rumours emerged that Wesfarmers was giving IAG the once over, then it was reported that the east-coast insurer was poised to announce a bid for the insurance business of Malaysia’s Kurnia Asia by the end of the week. By Friday, nothing had come to pass on either front, but IAG had announced a deal to take over New Zealand’s second largest general insurer, AMI, for $NZ380 million ($290 million). Shareholders had a right to feel like they’d been taken for a ride.

However, IAG has announced that it has submitted a proposal to Malaysian regulators to enter into an agreement to buy Kurnia Insurans (Malaysia) Berhad (Kurnia), the insurance arm of Kurnia Asia, through its 49 per cent owned Malaysian associate AmG Insurance Berhad. If that is approved, AmG would put a bid in for Kurnia and IAG would effectively pick up a 49 per cent stake in the target.

Last week in Malaysian newspaper The Star, it was reported that IAG could be forking out up to $700 million for Kurnia. A spokesperson from IAG says this speculation is misleading. Whatever the case may be, the rationale for a Wesfarmers bid for IAG was to link its predominantly west-coast insurance arm with IAG’s largely east-coast operations. An expansion into New Zealand and Malaysia complicates matters, to say the least.

*A previous version of this article incorrectly implied that IAG had put in a firm bid for Kurnia, rather than just submitted a proposal to regulators to make a bid.

M&A in 2012

The Australian mergers and acquisitions landscape was historically quiet in 2011 and the volatility spewing forth from Europe as 2012 approaches doesn’t bode well. However, private equity has shown some steady signals of being willing to tolerate the volatility in the search for opportunity. Ernst & Young believes there’s reason to hope, with activity to remain strong in early 2012. "Overall we do expect deal activity to continue and not just from Australian private equity funds,” Oceania private equity leader Bryan Zekulich said. "Global and regional funds are increasingly looking at investments here because of the stable market and good growth prospects relative to many other markets.” Ernst & Young also foresees some corporate divestments, government infrastructure deals (think NSW) and more agreements between Australia’s unstoppable resources sector.

Macquarie Group

Macquarie Group has stirred a little lately. In Europe, Macquarie Infrastructure and Real Assets has offloaded a 9.9 per cent stake in UK utility Kemble Water, while Macquarie Renaissance Infrastructure Fund has picked up a $US83 million stake in Russia’s GSR Energy Investments. Now attention is shifting back home.

According to The Australian Financial Review, the appointment of Greg Ward to managing director of Macquarie Bank has sparked discussion inside the silver donut that its banking and financial services division could be put up for sale. It’s been said that Commonwealth Bank has had a look at the non-core Macquarie division, while HSBC and Barclays Capital are also interested, but are at a disadvantage due to their lower book values.

Alliance Aviation Services

Alliance Aviation Services has finally completed its long-awaited debut flight after finishing its first day of trading at $1.65, 3.1 per cent above its share offer price of $1.60. It started even better with the shares first changing hands at $1.70, a 10 per cent premium. Alliance Airlines, which offers flight-services for remote mining sites, has been in the grips of an on-again off-again affair with an IPO – understandably, because volatility from Europe has made every company thinking about listing assets think twice.

Growthpoint Properties Australia

Growthpoint Properties Australia has made sure it doesn’t end the year in a lull. The company has picked up three offices in Brisbane and a development project in Sydney for $289.5 million. A three-for-ten renounceable rights offer to raise $166.4 million has been dragged out to pay for the move. Growthpoint Properties Australia shares actually jumped a little on the news, which could be explained by the 61 per cent shareholding from Johannesburg Stock Exchange-listed parent Growthpoint Properties propping up the company during a capital raising.

Wrapping up

CVC Asia Pacific is reportedly poised to appoint its all-important advisers for the pending battle to refinance its Nine Entertainment debt. The Australian Financial Review reports that Goldman Sachs and Macquarie Group are expected to be the lucky winners. The same newspaper understands that global metals trading giant Glencore remains one of two leading candidates to pick up CST Mining’s 70 per cent stake in the Mina Justa copper project in Peru – with CST vice president Owen Hegarty looking on.

And still in resources, BHP Billiton has offloaded its 51 per cent in the Chidliak diamonds exploration project on Baffin Island, Canada. The winner is Peregrine Diamonds, which will hand over $C9 million ($8.4 million) for it.

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