BREAKFAST DEALS: Packer's silver screen

James Packer is moving into the movie business, while BHP Billiton and Rio state their priorities.

James Packer could make a bit of coin out of his latest media venture, a partnership with a big-time Hollywood director. But his gambling ambitions are front-and-centre, just as his chief rival in NSW gets a new boss. Meanwhile, BHP Billiton and Rio Tinto are offloading non-core assets, revealing their priorities and a few other things in the process. Elsewhere, Talison Lithium officially has a new preferred suitor, Leighton has come to Macmahon’s rescue and Singapore Airlines says 10 per cent of Virgin Australia is enough, for now.

James Packer, Brett Ratner, Echo Entertainment

Gaming billionaire James Packer is setting up a production company with one of Hollywood’s most commercially minded directors Brett Ratner.

A spokesperson for Packer has confirmed the relationship with the 43-year old director, which will spawn a company called RatPac Entertainment. This could be a bit of a nod to the ‘Rat Pack’ of the 1960s with Frank Sinatra and Dean Martin, as well as the ‘Brat Pack’ of the 1980s with Rob Lowe and Molly Ringwald.

"We intend to build a major independent film company, which not only has the ability to fully finance its films but which also offers creative independence for its filmmakers,” Ratner said in a statement.

While the word ‘independent’ can often mean unprofitable in the film industry, Ratner is one of America’s most profitable directors, with the combined gross of his films easily entering the billions of dollars.

It’s true that Packer has ended his family’s longstanding relationship with Nine Entertainment and Foxtel, but the idea that he’s exited media is misplaced.

Aside from his new venture with Ratner, Packer still holds a stake in Ten Network.

The billionaire’s gaming ambitions are of course his highest priority and the changing of the guard at his most important rival, Echo Entertainment, is now complete.

Echo announced yesterday that director John Redmond is taking over from Larry Mullins.

One of the interesting things about the Crown-Echo balance of power is that Packer still hasn’t received approval to increase his stake in Echo, which currently sits at 10 per cent.

Things have really gone quiet in this regard. Malaysian billionaire KT Lim has a similar proposal before regulators after his company’s haphazard acquisition of a stake in Echo.

Redmond has a lot on his plate.

BHP Billiton, Rio Tinto

The stake sales announced by Australia’s two largest miners say a lot about their priorities and create some interesting dynamics for the projects they’ve walked away from.

Firstly, BHP Billiton has offloaded its stakes in the $US30 billion Browse LNG joint venture, which is the story getting the majority of the headlines. The mining giant will receive $US1.63 billion from PetroChina in exchange for its 8.3 per cent stake in East Browse and 20 per cent stake in West Browse.

As Business Spectator’s Stephen Bartholomeusz points out, the project didn’t match BHP’s strategic criteria, nor was it a particularly easy beast to deal with from a minority shareholder’s point of view.

Secondly, Rio Tinto and Anglo American sold their respective stakes in South African copper miner Palaboro Mining to a consortium. Rio picked up $US373 million for its 57.7 per cent stake, while Anglo American got $103 million for its 16.8 per cent stake.

Like BHP, the investment was too marginal to fit into Rio’s investment criteria and, like BHP, there was some Chinese involvement. The consortium was led by South Africa’s Industrial Development Corporation and China’s Hebei Iron & Steel Group.

Woodside Petroleum shares jumped 1.6 per cent yesterday against a flat benchmark index. That’s a reflection of the fact that the exit of BHP and Chevron (earlier this year) removes the two main parties that held reservations about Browse. Investors are more confident that the project will go ahead.

It leaves Woodside with PetroChina, Royal Dutch Shell, BP, along with Japan’s Mitsubishi and Mitsui.

The interesting thing here is that PetroChina and Royal Dutch Shell are the co-owners of Arrow Energy, which the latter said earlier this month is considering "combining its reserves” with one of the other big LNG projects in Gladstone.

A theory floated by Goldman Sachs analysts was that Arrow’s owners could team up with Origin Energy’s Australian Pacific LNG project, where a stake is up for sale to the right buyer.

The idea of PetroChina and Shell buying stakes in all three of those LNG ventures is a bit of a stretch to say the least, particularly with China’s Sinopec already partnering with Origin.

Talison Lithium, Chengdu Tianqi Industry Group, Rockwood Holdings

China’s Chengdu Tianqi Industry Group has officially triumphed over US chemical producer Rockwood Holdings in the race for Australian-based, Toronto-listed lithium producer Talison Lithium.

While it isn’t officially over, Talison says it will pay Rockwood a $C7 million break fee from its $C6.50 a share cash offer, or $C700 million ($675 million) for the lot.

Tianqi came in at the last minute, snapped up more than 15 per cent of the company and fired a rival $C7.15 offer.

Talison’s board said last week that it would recommend the Tianqi bid in the absence of a better proposal. With a big stake in the target Tianqi was well placed to frustrate a rival proposal and Rockwood said back in November that it wasn’t going to get into a bidding war.

Leighton Holdings, Macmahon Holdings

There aren’t many deals worth less than $20 million that get this kind of press.

Macmahon Holdings has confirmed that it’s selling its construction arm to giant Leighton Holdings for $16.3 million and with it goes $574 million worth of work. The majority of the projects will go to Leighton subsidiary John Holland.

The company told investors yesterday that’s it is changing direction to become a straight mining services company, adding that it’s seeking $80.7 million from investors sure up its balance sheet.

Leighton, which owns 19 per cent of Macmahon, will take up all its entitlements for the raising, which comes in at 16 cents a share. The shares last traded at 26 cents.

Tellingly, Macmahon told shareholders that, subject to the raising, its banking syndicate would give it a waiver on losses from some construction projects in relation to covenants in September next year.

Profit is now expected to come in at nil-$25 million. In September the company was expecting nothing much less than half last year’s $56.1 million profit; a few weeks before that a profit increase was expected.

Singapore Airlines, Virgin Australia

The seismic shifts in the Australia – and indeed global – aviation market won’t include a larger stake in Virgin Australia for Singapore Airlines. At least for now.

That’s the takeaway from the interview that Singapore Airlines chief executive Goh Choon Phong has done with The Australian. Ten per cent is enough at the moment.

"Ten per cent is a strategic stake,” said Goh. "It's really to cement our relationship; (a) demonstration of our commitment to the Australian market.

"It is a stake we deem sufficient at this point of time. Whether there will be a change in the future we will have to see.”

Goh also indicated that there would be more announcements to come about the carrier’s co-operation with Virgin Australia. It stands to reason that the closer the two become, the more logical a larger stake becomes.

But for now, the proceeds from the sale of Virgin Atlantic will stay in the Singapore Airlines coffers.

Coca-Cola Amatil

Coca-Cola Amatil managing director Terry Davis might have his eyes on the end of 2013, when his company can re-enter the Australian beer market, but that’s not stopping him from spending up on new assets.

While the bottling company’s profit forecast failed to impress as 2012 draws to a close, CCA announced the acquisition of PT San Miguel Indonesia Food and Beverages non-alcoholic bottling facility in Indonesia. Between the purchase and development of the 20,000 sqm production facility and the high speed bottling line warehouse, CCA expects to spend around $45 million.

"The acquisition of this large and modern facility is a very important acquisition for CCA as it fast tracks our expansion plans for the Jakarta region, providing a well located complement to our Cibitung manufacturing operations,” said Davis.

Weak consumer spending and dreary weather have limited CCA’s growth in Australia.

Engenco, Dale Elphinstone

Shareholders in junior industrial company Engenco would have been feeling depressed enough about 2012 with the share price down 80 per cent. Then the triple-hit came.

In a single press release, Engenco announced an earnings downgrade, a new capital raising and takeover offer in the one go.

Starting with the earnings downgrade, Engenco has swung from an anticipated profit of up to $9 million, to a loss of $10 million to $12 million, thanks to "recently identified market and operational performance issues”.

Engenco was going for a rights issue at 25 cents, announced in November, but that was cancelled at the beginning of this week. Now shareholders are looking at a $28 million raising at 15 cents a share, via a three-for-two renounceable issue. The company's market cap at the moment is $46.7 million with a share price at 20.5 cents (suspended since December 5).

Tasmania’s richest person Dale Elphinstone (who you might remember from the scuffle with Seven Group billionaire Kerry Stokes over National Hire) owns 37.6 per cent of Engenco and is thus crucial to any capital raising.

And Elphinstone has thrown an 18 cents a share cash offer at Engenco, via his company Elph (a name this column finds just a little amusing). That’s a 20 per cent premium to the float price.

Engenco has kept RBS Morgans and Minter Ellison on hand to help the independent directors make sense of all this.

Wrapping up

As expected, Telstra Corporation has won the mobile broadcasting rights for the National Rugby League as part of a $100 million deal including sponsorship.

The five-year deal gives Telstra the right to broadcast 8 games per week via mobile devices, along with special events like the State of Origin series.

While we’re talking mobile, Webjet is picking up some online travel operations of Zuji, a subsidiary of online travel agency Travelocity.

Webjet is forking out $US25 million ($23.6 million) for the privilege of taking Zuji’s Australian, Hong Kong and Singaporean assets.

Meanwhile, an investment firm backed by the wealthy Australian Maloney family called Tulla Group has taken a controlling stake in SumoSalad, according to The Australian. The target company is a fast food chain, but of the healthy kind.

And finally, a subsidiary engineering and construction company Forge Group has won $105 million worth of work to develop a power station for BHP Billiton.

The Yarnima Power Station is a few kilometres north of Newman (the town, not the Seinfeld character).

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