BREAKFAST DEALS: PayTV prime time

The Foxtel-Austar merger finally looks headed for the home straight, while Pact is cleared for a Viscount takeover.


* This column was written prior to the ACCC's approval of Foxtel's Austar takeover.

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The $1.9 billion merger between Foxtel and Austar looks set to see the light of day although the outcome is going to leave the likes of Optus and iiNet less than satisfied. Meanwhile, the ACCC finally waves through a $150 million deal between Pact Group and Viscount Plastics and Glencore gets a helping hand from Qatar’s sovereign wealth fund in making its $41 billion bid for Xstrata a reality. Elsewhere, Facebook spends a billion dollars on its biggest acquisition to date and engineering consultancy Sinclair Knight Merz looks to join forces with a heavyweight partner.

Foxtel, Austar

The $1.9 billion pay TV party between Foxtel and its regional rival Austar looks set to see the light of day with the Australian Competition and Consumer Commission expected to give the deal its blessings. It’s been a long and winding road for all concerned and after almost a year of uncertainty the merger will come as relief to both operators and Foxtel’s major shareholder, Telstra.

The ramifications of the merger for Telstra and just how effectively the telco would leverage its shareholding in the Foxtel-Austar combo was always the main sticking point for the regulator. The proposed merger was announced in May last year and despite the ACCC’s initial concerns about lessening of competition in the pay TV market the real game was always about sussing out how powerful the merged entity would be in the changing TV landscape, and how much of an advantage it would deliver to Telstra over its competition.

Foxtel did agree to undertakings that would prevent the merged entity from entering into exclusive content agreements to acquire IPTV rights for a range of content and while it may have placated the ACCC, it is unlikely that the likes of Optus and iiNet will be entirely pleased with the outcome. Mainly because a lot of the premium content (sports) is still kept under lock and key by Foxtel.

Once the regulatory approval is out if the way, Foxtel and Austar will head to Federal Court on Friday or approval and the whole thing should be wrapped up by next week.

Pact Group, Viscount Plastics

Sticking to the regulatory arena, the competition watchdog has decided not to stand in the way of the $150 million takeover bid for Viscount Plastics lobbed by Pact Group, which is controlled by late Visy supremo Richard Pratt’s son-in-law Raphael Geminder.

This is actually third time lucky for Geminder because Pact’s previous two attempts at Viscount, in 2008 and 2009, were scuttled by the ACCC. This time around the regulator reckons the proposed acquisition would not result in a substantial lessening of competition mainly because the merged entity should face plenty of competition in the domestic market for plastic pails from other suppliers.

"The ACCC formed the view that the merged firm is likely to be constrained in the market for plastic pails by alternate domestic suppliers, many of whom could readily
expand by increasing their production capacity to defeat an attempted price increase by the merged firm,” ACCC chairman Rod Sims said in a statement.

The merger will leave National Can Industries Limited as the second largest supplier of plastic pails in the country. As it turns out the Geminders have a 19.9 per cent stake in NCI which they have agreed to sell.

Qatar, Xstrata

Moving to the miners, Qatar’s sovereign wealth fund has swooped in to increase its stake in takeover target Xstrata to over 5 per cent in what should clear the way for suitor Glencore to seal the deal. Qatar has shelled out $2.65 billion dollars to become Xstrata's third-largest shareholder behind Glencore and asset manager BlackRock Inc.

Glencore unveiled the planned $US90 billion merger with Xstrata in February and immediately ran into trouble with shareholders, with two British institutions holding about 3.5 per cent of Xstrata, Standard Life and Schroders, saying that they would vote against the deal.

The partnership requires the backing of 75 per cent of shareholders and the Qataris with their 5 per cent stake are almost certain to vote in favour of Glencore.

The sudden appearance of a sovereign wealth fund may make some Xstrata shareholders, especially those against the merger, a little uneasy but Glencore boss Ivan Glasenberg and Xstrata’s Mick Davis are about to start their global roadshow. The charm offensive will no doubt look to allay any apprehensions that Xstrata shareholders may harbour. Is it going to be enough to coax recalcitrant institutional shareholders? Probably not but it might not matter in the long run anyway.

Resourcehouse

In other news, Clive Palmer may have been in the headlines for a lot of reasons unrelated to mining but it looks like the mining magnate is looking to forge a family dynasty, with the inclusion of his son Michael on the board of two more of his companies.

According to The Australian, Michael Palmer has been appointed director of two more of his companies, including the failed float vehicle Resourcehouse, whose board recently farewelled former foreign minister Alexander Downer, proposed Resourcehouse chairman Domenic Martino and Chinese representatives. The Resourcehouse board now includes Palmer, his son Michael and his nephew and longtime business partner Clive Mensink.

BHP Billiton, Rio Tinto

Finally, one of the world's top diamond retailers has reportedly confirmed its interest in the diamond assets being shopped around by Rio Tinto and BHP Billiton.

According to Fairfax papers, North American company Harry Winston has expressed its interest in the assets and the company’s boss Robert Gannicott has also warned that there are very few suitors out there who will be willing to buy the mines on offer.

Harry Winston is a joint venture partner with Rio in the Diavik mine in Canada, and legally has first right of refusal on purchasing Rio's 60 per cent stake in that mine.

Facebook, Instagram

With its blockbuster $US5 billion IPO edging ever closer it was only a matter of time before Facebook was going to push the button on a heavyweight acquisition and the social network has not disappointed with the $US1 billion buy of internet sensation Instagram. Facebook will pay $US1 billion in cash and stock for the mobile photo-sharing application. This is the biggest acquisition in Facebook’s history and the social network is unlikely to splash this kind of cash anytime soon. The acquisition isn’t just about filling the photo-sharing/mobility gap for Facebook; it also allows the company to mop up a potential rival.

Microsoft, AOL

Meanwhile, AOL Inc is set to sell over 800 of its patents and related applications to Microsoft Corp, and would grant Microsoft a non-exclusive license to the patents it retains, for slightly over $US1 billion in cash. The internet company said it plans to return a "significant portion of the sale proceeds" to shareholders. AOL will continue to hold over 300 patents including advertising, search, and mapping, and said it received a license to the patents being sold to Microsoft. Read more about both the Microsoft and Facebook deals in today’s Technology Spectator.

Wrapping up

Australian engineering consultancy Sinclair Knight Merz is reportedly in talks with prospective partners to feed its growth. According to The Australian Financial Review, SKM’s list of partners includes Australia’s largest engineering service group Worley Parsons, UK’s AMEC, US-based contractor KBR and France’s Technip. Meanwhile, indicative bids for Leighton Holdings’ waste management unit, Thiess, are expected to land by the end of this month.

Meanwhile, former Westfield Group chief financial officer Marlon Teperson has joined shopping centre owner Centro Retail Australia. Teperson will be Centro Retail's CFO from April 16, replacing interim CFO Chris Nunn.

Elsewhere, paper and packaging group Amcor has paid $US40 million ($A38.85 million) for a tobacco packaging plant in Mexico. The acquisition of the Aluprint plant in Monterrey would give Amcor a presence in Mexico, a large and strategically located tobacco packaging market, the company said. Amcor also recently purchased a tobacco packaging operation in Argentina.

Insurance Australia Group has completed its $NZ380 million ($A303.72 million) takeover of New Zealand's AMI Insurance after getting the all clear from regulators. Christchurch-based AMI was bailed out by the New Zealand government after a surge in reinsurance costs and gross claims from the Christchurch earthquakes of more than $1.5 billion.

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