BREAKFAST DEALS: Qantas chums

Qantas and Emirates raise hopes of a code-sharing deal, while Dulux Group draws an Alesco deadline.

Much of the national business media – including this column – have focused on the ability of Qantas Airways to secure a jointly-owned, premium Asian-based carrier. But the airline's entire international business is in trouble and Qantas’s relations with Emirates are reportedly warming, setting up the possibility of code-sharing deal. Meanwhile, Dulux Group has listed the time at which the paint will dry on its bid for Alesco Corporation. Elsewhere, Aurora Oil & Gas is speaking to its lawyers over the Eureka Energy bid, Toro Energy has won a crucial endorsement for a uranium mine in WA and Suncorp-Metway is joining the bond bash.

Qantas Airways, Emirates

Qantas Airways appears to be mending its relationship with Middle Eastern carrier Emirates, raising the possibility that the pair could finally fulfil hopes of sealing a code-sharing agreement that were dashed a decade ago. Speaking to The Australian Financial Review, Emirates president Tim Clark says he wouldn’t go as far as criticising former Qantas chief executive Geoff Dixon, but did say that current management is a little bit more open. "The thinking is a bit different now. I look at the way Qantas is today, and I think they would benefit from us as we would benefit from them,” Clark told the newspaper. Joyce also had some kind words for his Emirates counterpart.

A code-sharing agreement would greatly help Qantas with its network problems in Europe. At the moment it only really operates in London and Frankfurt through its agreement with British Airways. Qantas might have to manage that relationship delicately if it were to sign something with Emirates. It’s also important given the challenge that Virgin Australia, thanks to partner carriers Etihad Airways and Singapore Airlines, is posing to Qantas’s hold on the business traveller market.

Dulux Group, Alesco Corporation

Paint company Dulux Group has set the deadline for its ambitious play for garage door maker Alesco Corporation. In the predator’s revised bidders statement, Dulux said its $188 million offer at $2.00 a share will expire on June 26, at 7pm AEST. Alesco shareholders look set to receive their bidder’s statement from May 25.

Dulux has a lot riding on this play. The company snapped up a 20 per cent stake in its target either to bully the garage door maker’s board, or due to prior knowledge that securing Alesco would be no easy task. Whatever the reason was, Alesco has shown no sign of buckling to the $188 million bid.

Up until now the share price has given Alesco plenty of cover to play hardball with Dulux. But that power balance is shifting. Alesco shares closed below the offer price for the first time since it was announced. Alesco shares finished the session down 1.74 per cent at $1.98 – against a 0.67 per cent rise on the benchmark index – after consistently trading at a premium to the $2.00 a share offer price over the last few weeks.

The share price slump follows news from the weekend that CSR is firmly focused on organic growth. Previous comments from managing director Rob Snidel had created a brief impression that CSR might make a rival play for Alesco, but the company boss quickly emphasised that this was a ‘never say never’ scenario and that the building materials company is more interested in its current footprint.

Aurora Oil & Gas, Eureka Energy

The new debt facility of takeover target Eureka Energy might be enough to convince Aurora Oil & Gas to pull out from its $107 million takeover offer. In a statement to the market, Aurora said it has instructed its lawyers to investigate avenues available to it after Eureka announced some details about a $US50 million ($50.8 million) credit facility that it has set up with Macquarie Bank. Aurora believes the terms could be too expensive and is concerned that it can be drawn down without shareholder approval.

Aurora did add that no decision has been made on what it might do once it receives the legal advice. Eureka has already rejected the $0.45 a share takeover offer from Aurora, so with an apparently undesirable debt facility brewing at the target, this marriage mightn’t end up happening.

Toro Energy

Toro Energy has announced itself to the uranium industry after securing the approval of the Environmental Protection Authority for its Wiluna mine proposal in the Northern Goldfields. Toro shares surged 10.5 per cent to 7.4 cents a share after emerging from a trading halt. The company is the first to gain approval for a uranium mine in Western Australia.

There’s a reason why this brings Toro to the attention of Breakfast Deals and that’s the increasing interest of foreign buyers, particularly in Asia, in Australian uranium. When Prime Minister Julia Gillard announced a change in Labor’s policy to uranium exports to India in November, Toro was one of a handful of players that surged – not just because another customer was on the cards, but another investment group had emerged.

In January, Toro told the market that it had been speaking to two potential Asian investors interested in taking strategic stakes in the company, adding that it expects a "significant level of corporate activity” throughout the year. This news won’t hurt at all.

Suncorp-Metway

Regional lender Suncorp-Metway will follow the lead of its city-based rivals and issue a covered bond to diversify its funding portfolio away from volatile international markets. According to News Limited, Suncorp will begin approaching investors this week to see how enthusiastic they are about an instrument that will ease funding pressures for the rural operator.

ANZ Bank, Commonwealth Bank, National Australia Bank and Westpac Bank have all issued bonds since the federal government tweaked the laws covering them last year, in either local or foreign currencies. While the funding portfolios of our banks, including the smaller ones, are enormous and the issuing of covered bonds doesn’t significantly influence their make-up, it is a useful instrument in times of trouble. And it’s troubled times that we are in.

Ramsay Health Care

Ramsay Health Care managing director Chris Rex has set himself apart from his counterparts at National Australia Bank and Insurance Australia Group by hinting that he might even increase his company’s presence in the UK. According to The Age, Rex says Australia’s largest private hospital company would be happy to make acquisitions in Asia where growth is obviously strong, but isn’t too concerned about the negativity in the UK.

Some analysts have expressed concern about Ramsay’s UK business; in fact pretty much all Australia businesses with a footprint in the motherland have been brought into question. But speaking to the newspaper, Rex said Ramsay is "still very confident about the UK ... and indeed would be happy with increasing the size of our business there if an appropriate opportunity came along”.

Wrapping up

Packaging giant Amcor could be about to deploy its $1.7 billion warchest, if Deutsche Bank analyst Mark Wilson is to be believed. News Limited reports comments from the broker who believes Amcor could win big if it forked out for a company in a developed market.

In resources, Cooper Energy looks set to win the majority of Somerton Energy with its $31.5 million takeover bid, after the target’s biggest shareholder, Beach Energy, indicated that it would accept the offer. The only question is whether Beach goes for pure-scrip, or a combination of shares and cash. Meanwhile, Rio Tinto's Alcan has offloaded its wire and cable business to General Cable Corp for $US185 million ($187.9 million).

Elsewhere, PMP shares surged 11 per cent after a name was put to the face of the company bidding for the printer – TMA. And finally, Queensland Investment Corp intends to offload its stake in Facebook now that the company has gone public, according to News Limited. The investment has gone well for QIC, although it would have been handy if they could have sold out during the IPO as Facebook shares plunged 11 per cent overnight without the underwriters there to catch them.