BREAKFAST DEALS: Now for Rio's raising

The bombshell of Rio Tinto's 'Plan B' $US15 billion capital raising went off overnight, leaving Chinalco looking spurned and angry. There's also news on OZ, Goodman, Macquarie and Myer, plus, could Woolworths be looking at a deep-fried acquisition in Dixieland?

Rio Tinto

It's finally happened. Rio Tinto has walked from its deal with Chinalco and is set to raise not $US8 billion, not $US10 billion, but $US15 billion in an entitlement offer and placement, expected to be at a whopping 40 per cent discount. The insto component of this will be underwritten by a consortium of banks including JPMorgan, Morgan Stanley, Macquarie Capital and Credit Suisse. Not that all of these banks are winners from the situation. Credit Suisse and Morgan Stanley were advising Rio on the transaction with Chinalco, while JPMorgan was sitting across the desk advising Chinalco, along with Blackstone Group, Nomura and China International Capital Corporation (CICC). Also advising the Chinese were Mallesons Stephen Jaques. According to DealLogic data, Blackstone will fall from 11th place to 20th in the global M&A league tables, while CICC will drop from 24 to 65. Ouch. JPMorgan will, on the other hand, stay at number 1. Nevertheless, JPMorgan's participation in 'Plan B' raises the questions of separation between its ECM team and it's M&A advisors. The bank, now the world's biggest, is so large that inappropriate collusion is virtually unthinkable, but Chinalco, spurned and angry, will no doubt be looking for people to blame. Another scapegoat of course is Rio's boss Tom Albanese who pursued the deal, spurned an earlier advance by BHP Billiton and will now have to fork out a $US195 million break fee. And what of BHP? They're a winner in this case and market speculation is that a revised takeover offer for all or some of Rio's assets could soon be launched. The Australian government must also be breathing a sigh of relief. On June 15, FIRB was due to rule on Chinalco's investment and no doubt would have been blamed no matter what verdict they handed down.

OZ Minerals

Speaking of mining deal upsets, word on the street is that the Royal Bank of Canada and RFC Group are resubmitting their recapitalisation offer to OZ Minerals, saying that they will raise as much as $2 billion to give the stricken miner enough cash to pay off its debts and keep the show on the road. Yesterday OZ said it hadn't received any proposals "superior” to the one it is set to sign with China Minmetals, which involves the sell-off of all its assets bar Prominent Hill and Martabe (the latter which has already been sold) for $US1.2 billion ($1.47 billion). Considering that independent expert Grant Samuel has valued the OZ assets at $US1.6 billion, and considering that Minmetals made the offer to OZ under duress from its lenders and the markets, the deal was never a popular one. Nevertheless, the market will watch closely to see whether a $2 billion offer, which involves a $1.25 billion bond raising, will be good enough to be "superior”.

Goodman Group

Last month Macquarie Group "rescued" Goodman Group with a $300 million debt facility, at the price of not only the usual interest, but 30 cent options over 414 million stapled securities, equivalent to 20 per cent of equity on a fully exercised basis. It is unsurprising then that another company very familiar to Macquarie is said to be looking at taking a cornerstone equity position, a bona fide rescue. Canada Pension Plan Investment Board (CPPIB) is looking at helping Goodman recapitalise, according to the AFR, and along with China Investment Corporation, it might also buy assets from the beleaguered property group. For several months CPPIB has been looking to buy Macquarie Communications Infrastructure Group. JPMorgan is Goodman's financial advisor.

Woolworths

Fresh from the acquisition of Macro Wholefoods and Gage Roads Brewing Co, the people at Woolworths are looking at acquisition opportunities in North America and, according to the AFR, have appointed Citigroup's M&A team to do a reconnaissance mission. Possible takeover targets include Winn Dixie, which operates across Florida and the Deep South, Alabama's Bruno's and Bi-Lo, also in the South. There's also been takeover speculation down the aisles in Russia and Brazil, but it is unlikely that Woolies, under Michael Luscombe, will want to venture there. Winn Dixie may be the most attractive target, but America's Kroger, Safeway and SuperValu are believed to be eyeing the 520-store chain. To succeed in the former Confederate States Luscombe may need to apply some other type of grit.

Myer IPO

Another signal has been sent that Texas Pacific Group-Newbridge, the local arm of the TPG empire, may be getting closer to Australia's first big post-crisis IPO (see note on Macquarie, Breakfast deals June 4). Speculation has emerged overnight that TPG may sell out of British department store chain Debenhams as the group announces a £323 million placement and entitlement offer, which will be run by Merrill Lynch and Citi. Although TPG and fellow privateer firm CVC, which together hold a 20 per cent stake, will vote in favour of the raising, they are said to see it as an exit opportunity. TPG's Philippe Costeletos and CVC's Jonathan Feuer have both resigned from the Debenhams board. Costeletos, TPG's co-head of Europe, is also a director of Myer.

Centrebet and International All Sports

Bookmaker Centrebet has not ruled-out having another go at International All Sports, the former takeover target that this week announced a recommendation to be taken over by privately-held Sportsbet, which recently welcomed a 51 per cent shareholder in Irish betting group Paddy Power. If Centrebet enters the ring the deal will be one of the more colourful ones this year with betting on either side expected and plenty of colourful characters. Centrebet is run by Con Kafataris, Sportsbet is owned by Matthew Tripp and IAS has Mark Read, all well-known and veteran bookmakers. Paddy Power also lends a vivid emerald hue to the whole thing, with its marketing gimmicks -- like having a Tongan rugby player name himself Paddy Power by deed poll and accepting bets on everything from the existence of God to the number of ears a matador can cut off a bull -- only matched by Centrebet's recent decision to run a board on Australia's unemployment levels. Although we like to think that bankers and lawyers are a pretty colourful bunch too, they'll no doubt be the designated drivers on this one. Credit Suisse and Norton Gledhill are advising IAS, Canterbury Partners and Minter Ellison have been engaged by Sportsbet, while Paddy Power has recruited Baron Partners and Gilbert & Tobin. If Centrebet comes in it is likely that they'll again use Wilson HTM and Addisons.