BREAKFAST DEALS: Qantas commotion

Qantas Airways and Tourism Australia try to stay cool, while Cathay Fortune takes aim at Discovery Metals.

To say that the battle at Qantas Airways has flown off in an unexpected direction is an understatement. The airline and Tourism Australia are trying to reassure the industry that the jostling between current boss Alan Joyce and predecessor Geoff Dixon won’t impact the broader industry. Discovery Metals and independent expert KPMG have copped a spray from suitor CF Investments. Meanwhile, the buzz around Nathan Tinkler has gone strangely quiet, Macquarie Group has picked up an infrastructure debt management deal and former Fairfax Media chairman Ron Walker has distanced himself from any reports of a break-up or takeover play.

Qantas Airways, Tourism Australia

Both Qantas Airways and Tourism Australia have moved to reassure the tourism industry that the power battle on the carrier’s register, which has now spilled onto the plates of stakeholders everywhere, won’t negatively impact the broader tourism sector.

Qantas chief executive Alan Joyce and predecessor Geoff Dixon, chairman of Tourism Australia and suspected member of an activist shareholder group campaigning against his successor, are engaged in a bit of a proxy battle and Australian tourism appears likely to suffer as a result.

Yesterday, Joyce wrote to fellow stakeholders in the nearly $100 billion industry that marketing funding would be maintained, just not through the $44 million deal with Tourism Australia. As Joyce was reaching out to settle the industry down, The Australian understands that the Dixon consortium was continuing to talk to Qantas shareholders.

"Campaigns currently in market will be maintained, while we will also maintain our commitment to G’day USA and to the Australian Tourism Exchange,” Joyce said in an email, according to media reports.

"Furthermore, I also want to assure you that not one dollar in tourism marketing will be removed as a consequence of this decision.”

Joyce is getting some support from former Victorian premier Jeff Kennett this morning in The Australian Financial Review. The outspoken Liberal legend effective says the Dixon has had his time, though he maintains a profound respect for the former Qantas boss.

The current Qantas chief executive can quite rightly make the argument that his 10-year alliance proposal with Emirates is in the long-term interests of the tourism industry. In contrast, the apparent plan by Dixon, venture capitalist Mark Carnegie, ad kingpin John Singleton and Leighton Holdings boss Peter Gregg to float Jetstar and sell the Frequent Flyers business is about short-term valuation ‘realisation’.

But another former Qantas figure has come out of the woodwork to claim that the Emirates deal is "unambiguously bad for tourism”.

Former Qantas chief economist Tony Webber, who left the airline last year, wrote for Fairfax yesterday that he’d work again for Qantas if asked.

"The world without the arrangement between Qantas and Emirates will have fewer international seats than the world with it,” wrote Webber.

"Fewer seats means fewer passengers, including inbound tourists. While Qantas will divert some capacity from Europe to Asia as a result of the tie-up, the net impact will be fewer seats entering and leaving the Australian market.”

Webber does point out the not-so-small number of reasons Qantas simply can’t carry on flying to Europe by itself.

Meanwhile, Tourism Australia has fallen in behind its chairman, putting aside the fact that the body’s board can’t actually dismiss Dixon.

The industry group’s managing director, Andrew McEvoy, further argued that Tourism Australia’s deal with Qantas might have been its largest, but it represents just 6 per cent of its total marketing spend. He expressed confidence that the body’s future marketing spend "won’t be compromised in any way”.

Qantas alliance partner Emirates is offering strong support for Joyce and his strategy, but you get the feeling that the chief executive is using Tourism Australia as a pawn to bring the consortium’s background discussions to a head.

It hasn’t worked. As Business Spectator’s Stephen Bartholomeusz points out, the tourism minister is staying quiet on the conflict at least for now (Will Qantas cop a tourism backlash? November 29).

Talk about turbulence.

Discovery Metals, Cathay Fortune

The Chinese equity group pushing the $890 million takeover offer for Discovery Metals is none-too-impressed with the copper miner’s target statement.

Cathay Fortune, which is bidding with China-Africa Development Fund, has taken aim at Discovery and the author of its independent report, KPMG, over what it claims are unrealistic "macro-economic and operating assumptions”.

Discovery doesn’t have a lot of room to manoeuvre here. The company has refused to engage with the CF Investments consortium at $1.70 a share and the independent expert’s report concluded the company is worth between $1.74 and $2.20 a share.

The target is also the subject of a legal dispute with contractor Sedgman. While Discovery is confident that its antagonist doesn’t have a claim, if the $20 million Sedgman believes it is owed is factored into the company’s outlook, the bottom end of that KPMG range slips to $1.72.

CF claims that Discovery’s copper price forecasts are "well above” the consensus forecasts of industry analysts.

Whitehaven Coal, Nathan Tinkler

Today is supposed to be the day for young coal tycoon Nathan Tinkler, but the chorus of reports heralding a likely "liquidity event” has gone almost totally silent.

Yesterday, media organisations of all stripes were much more comfortable reporting that Tinkler was understood to have $700 million in debts against a $560 million stake in Whitehaven Coal. This column couldn’t help but report the consistent theme.

From all corners the story was that key lender Farallon Capital was fed up with the situation and was going to call in $US200 million ($191 million).

This morning, The Australian Financial Review reports that the "latest suggestion” is that Farallon will give Tinkler more time to find a solution to his current position.

That’s about it, the focus has for some reason shifted from a $US200 million deadline with his key lender to a $6 million payment Tinkler is apparently trying to cobble together to save his horse racing empire. The liquidity event is either ignored or mentioned at the bottom of the article.

This isn’t the first time reporting on the Tinkler-Whitehaven jostle has left readers feeling somewhat bemused.

When Whitehaven first announced that Tinkler was investigating a possible privatisation push, commentators and analysts across the board said he’d have to produce a bid of at least $6 a share. Otherwise, he’d be wasting everybody’s time.

This column reported at the time that the argument made a certain amount of sense, given the value Tinkler himself gave Whitehaven when the Aston Resources merger went through.

Yesterday, Whitehaven shares closed at $2.85, with a maximum of $1 attributable to Tinkler’s lingering, unwanted presence on the register.

Macquarie Group, Swiss Re

Investment bank Macquarie Group has won the approval of global reinsurer Swiss Re to run $500 million worth of investments in infrastructure projects.

Infrastructure is becoming an increasingly compelling investment class, particularly as government debt yields continue to push market players out.

Macquarie Infrastructure Debt Investment Solutions will invest the funds in senior secured debt from infrastructure companies predominantly in northern Europe.

Macquarie isn’t alone. Asset managing behemoth BlackRock announced the beginning of its own infrastructure debt arm this week.

Wrapping up

Listed satellite company Newsat has entered into a trading halt as it seeks to raise a reported $200 million from institutional players and shareholders. The Australian Financial Review is carrying that $200 million figure.

Meanwhile, fund manager Cromwell Property Group will launch an unlisted property syndicate to the tune of $67 million, according to The Australian. Dubbed Cromwell Syndicate Trust, the syndicate will hold a Melbourne office tower.

And finally, the hesitation with which this column reported rumours that former Fairfax Media chairman Ron Walker might be talking with venture capitalist Mark Carnegie and ad man John Singleton about a run at his old employer has turned out to be justified.

Walker put out a statement yesterday saying that he wouldn’t be involved in "any takeover or dismantling of the company,” according to the AFR.


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