BREAKFAST DEALS: Packer's new hand

There’s less reason for James Packer to take up his now approved higher stake in Echo, while TV eyes are fixed on Cricket Australia.

Gaming billionaire James Packer has finally won approval from New South Wales regulators to take a larger stake in Echo Entertainment. So, will he actually act on it? Ten Network is getting punchier in its pitch for the cricket, how will the administrators of the game react? And Rio Tinto has a second private equity suitor for its majority Northparkes copper-gold stake, while New Zealand’s Mighty River Power has made a seamless entry to the markets.

James Packer, Crown, Echo Entertainment

Echo Entertainment shares could be in for a boost this morning as speculators ponder the chances of billionaire James Packer increasing Crown Limited’s stake in the gaming company.

Packer finally received clearance from the NSW Independent Liquor and Gaming Authority to increase Crown’s stake in Echo some 15 months after applying for the regulator’s blessing to move to 25 per cent from 10 per cent.

The authority would only let Packer move to 23 per cent, because a 25 per cent stake would trigger change of control provisions in US securities that Echo issued last year.

Additionally, the regulator said that it would have to give permission to attempts to elevate people from Crown or any associated entities into boardroom or management positions at Echo.

Because Echo has a presence in Queensland, Packer still needs approval from the Sunshine State, but that appears largely assured.

So how high will Echo bounce? Probably not too much.

In the 14 months that have transpired since Packer first asked for permission for the limit on his stake to be lifted, he has put a partnership with Echo aside and a proposal to build a six-star casino at Barangaroo – targeted at Asian high rollers – on the desk of Premier Barry O’Farrell. If anything, it makes more sense for Packer to reduce his stake.

Echo has responded with an unsolicited proposal of its own to the NSW government to expand The Star. The only obvious way that Packer would want to commit more funds to Echo’s register with Barangaroo’s construction budget to deal with is if the government picks Echo’s proposal. That’s a matter for the O’Farrell cabinet.

What Echo’s share price really needs for some spark – it’s down 21 per cent over the last 12 months – is some competitive tension, or at least the potential for it.

The NSW regulator wasn’t giving anything away about whether it would give Genting billionaire KT Lim the same approval that it has given rival Packer. One would assume that there would have to be a damn good reason to reject Lim and approve Packer.

Cricket Australia, Ten Network, Nine Entertainment

It’s very appropriate to move from a discussion about the Packers to a story about Australian cricket broadcasting, which is something the family name is synonymous with.

Ten has pitted itself firmly against the home of Australian cricket, Nine Entertainment, with a $500 million cash offer for the next five-year broadcasting contract. For a company with a market cap of $827 million, that’s a big deal.

News has also emerged that Ten is on the cusp of announcing that it has also won the rights to broadcast the Russian Winter Olympics in 2014 for around $20 million.

It’s clear that the troubled free-to-air TV station is doing more than trying to rekindle its rapport with younger viewers, which would suit Cricket Australia, which is trying to connect with the next generation of viewers perhaps not charmed by the Benauds of the world.

Ten is pitching for sports broadcasting rights because that’s the currency of the free-to-air broadcasters.

Cricket Australia is also engaged in a legal dispute with Nine over the last-rights nature of its existing broadcast contract. Basically, Cricket Australia believes rights to the Big Bash League, which didn’t exist when the last contract with Nine was signed, do not fall under Nine’s ‘last rights’.

It’s an interesting debate. What happens if Big Bash games are clearly being scheduled at the expense of other formats that Nine does have the right to broadcast? Indeed some of the players are concerned there are too many 20/20 matches being scheduled… that is, of course, until the cheque arrives in the mail.

Rio Tinto, Carlyle Group

US private equity giant Carlyle Group has reportedly lodged a bid for Rio Tinto’s 80 per cent stake in the Northparkes copper-gold mine in central New South Wales as new boss Sam Walsh looks to offload non-core assets.

Dow Jones, citing a person familiar with the situation, reported that the price of the offer remains unknown, but analysts from Commonwealth Bank of Australia believe it could raise as much as $US1 billion ($997.0 million).

Carlyle isn’t the only private equity major thought to be circling Northparkes. Reports have also pointed towards Kohlberg Kravis Roberts.

Rio is selling off assets along with a number of big mining players, including rival BHP Billiton, as the focus shifts from putting revenues from high commodity prices to work to core-assets.

The miner recently agreed to offload the Pinto Valley copper and rail project in the US state of Arizona for $650 million to Canada’s Capstone Mining Corp.

Meanwhile, Rio has secured funding support from Australia’s Export Finance and Insurance Corporation for the $US5.1 billion expansion to its Oyu Tolgoi mine in Mongolia, according to Fairfax Media.

The size of the loan was not revealed.

Mighty River Power

Mighty River Power completed a textbook landing on the New Zealand Stock Exchange late last week, finishing its maiden session up almost 5 per cent.

MRP shares traded as high as $NZ2.73 each against an offer price of $NZ2.50, giving it a market cap of $NZ3.67 billion ($3.04 billion).

It’s important from a PR perspective for IPOs, particularly government issues, to have a good first day on the market. Otherwise investors (who are frequently voters when it’s a privatisation) feel like they’ve been shafted and the issuers reputation can be sullied. Think Myer and its former private equity owners at TPG Capital and Blum Capital back in November 2009.

The New Zealand government raised $NZ1.7 billion ($1.4 billion) from the issue of shares equating to a 49 per cent stake in the utility, which will be crucial to the Key government’s aim to return the country’s budget to surplus.

With the Coalition headed for what must be certain victory in September and a structural budget deficit for the next four years or so, Australia could be headed for a similar strategy of floating your way back to surplus.

Wrapping up

Trust Company shareholders have got their hands on the target’s statement in regards to offer from Perpetual that all but turns the Equity Trustees rival proposal to dust.

Elsewhere, the Foreign Investment Review Board has given its approval of BESIX Group’s purchase of a 15.6 per cent stake in developer Watpac Limited.

And finally, Mirvac Group has won the portfolio of seven GE Capital office assets across Melbourne, Sydney and Perth for $584 million. The property group plans to raise $400 million through a fully underwritten institutional placement to pay for it.

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