BREAKFAST DEALS: Qantas headache

Qantas will soon find out whether a sustainable deal with the unions is achievable. But if negotiations and arbitration can't deliver, then foreign ownership could become a real hot button for Qantas. Meanwhile, Centro will face yet another court case – this time against its former advisors JPMorgan – which could once again threaten its restructure plans and plunge it into administration. Elsewhere, Shell is open to Australian targets as Santos takes Eastern Star Gas, Fairfax is holding on to its metro radio assets as Ninemsn could be about to make a killing, and all is not sweet at the Proserpine sugar mill as shareholders knock back an offer from Sucrogen.

Qantas

Deal-starved private equity operators and investment banks might think this morning about putting Qantas Airways high on their agenda. If, after 21 days of negotiations and a possible arbitration hearing, Qantas can't obtain a deal with its workforce that enables it to be competitive then maybe it's time for another group to operate the airline.

After all, Qantas directors in 2007 recommended a $5.60 bid from a private equity group, but it was narrowly rejected by shareholders. The bid was highly leveraged and the subsequent global financial crisis might have seen a private equity-owned Qantas go under. But the shares closed on Friday at $1.54, 62 per cent down from the offer price in 2007.

Speculation emerged in August that private equity was circling Qantas and that discussions in the upper echelons of Canberra had taken place about the airline's foreign ownership restrictions. Those suggestions were brushed aside as it was seen as politically unimaginable that Qantas could fall into foreign hands. But locals might also be interested. If the company can't get costs down in pending negotiations or arbitration, a spin-off of the airline operation (as distinct from the back-up operations) or a sale may be the Qantas board's only option. Or at least that's what investment banks are contemplating. Canberra's headaches over Qantas are far from over.

Centro

Centro must clear yet another hurdle in its quest to secure its $3 billion merger of Centro Properties and Centro Retail in an effort to stave off administration. JPMorgan, a former advisor to the debt-laden group, has asked the NSW Supreme Court to consider the voting arrangements for the restructure of Centro's $1.1 billion in note holders. If the judge rules in JPMorgan's favour, Centro could very well meet its end as an independent company.

Shell, Eastern Star Gas, Santos

Royal Dutch Shell still has its eye out for bolt-on acquisitions in the Australian market. Last year Shell scooped up Arrow Energy with the help of PetroChina for $3.5 billion as part of its efforts to build a liquid natural gas play in Queensland. But Shell chief financial officer Simon Henry says the UK oil giant isn't finished just yet. According to the Australian Financial Review, Henry says the company is still open to buying assets in the same way that Arrow has just taken control of Bow Energy. It's another angle on Shell, where the speculation has recently focused on a potential delay to the sale of its stake in Woodside Petroleum due to fluctuating markets. On the other side, it could be a good time to buy.

Meanwhile, still in the gas sector, Eastern Star Gas shareholders have strongly supported the $700 million-plus takeover offer from Santos. A vocal minority that opposed the deal had little impact, with the shareholders voting an overwhelmingly 94 per cent in favour of the proposal. And Santos has also sold its 40 per cent stake in the Evans Shoal gasfield in the Timor Sea to Italy-based Eni for $US350 million ($326.9 million).

Fairfax Media

After almost six months on the shelf, Fairfax Media has decided to hold onto its metropolitan radio assets after failing to find a bidder with the right price. That means that Sydney's 2UE, Melbourne's 3AW, Brisbane's 4BC and Perth's 6PR stations will stay under the Fairfax banner, while the rural assets were successfully sold to regional network Grant Broadcasters for an undisclosed amount. Fairfax was expecting to fetch at least $300 million for the metro stations and while one bidder, thought to be Macquarie Radio Network, was willing to pay a premium, the structure of the finance was not acceptable for Fairfax. Now the media company will have to come up with a new strategy for those radio assets and Macquarie Radio Network will have to think of another way to find an audience.

Meanwhile, Ninemsn is apparently looking at selling its 30 per stake in online health insurance comparison website iSelect. According to The Australian, the CVC Asia Pacific-backed company is believed to be receiving advice from Credit Suisse on a potential sale that could be valued at more than $400 million.

Chi-X

Japanese-backed sharemarket operator Chi-X debuts today and the new kid in town is turning up the heat on the Australian Securities Exchange in more ways than one. Speaking to the Australian Financial Review, chief operating officer Peter Fowler says Chi-X will offer stockbrokers ownership stakes in the company in a bid to win them over. The news comes at a terrible time for ASX, which was left red-faced last week after a trading outage prevented stockbrokers across the country from trading right when the market-moving European debt deal was about to be announced.

Proserpine Cooperative Sugar, Sucrogen, Tully Sugar

Proserpine Cooperative Sugar Milling Association faces an uncertain future after grower members rejected a $115 million offer from Sucrogen, according to chairman Lou Raiteri. The offer from the former CSR company, that's now with Singapore's Wilmar International, was opposed by 31 per cent of the grower-members, when the deal needed a minimum acceptance of 75 per cent. That's left the board wondering what to do about the $15 million debt that needs to be settled this week. While Proserpine says its bankers at Westpac have given it support for the meantime, suitor Tully Sugar says it can step in. Tully, owed by China's COFCO, put a $120 million offer on the table but it fell foul of the company's independent expert on the basis of "material legal uncertainty”.

Wrapping up

Macquarie Group chief executive Nicholas Moore has put the company's stake in MAp firmly on the chopping block, but only if the price is right. Speaking to the Australian Financial Review, Moore declined to give a ball park figure on what the investment bank would be willing to accept for the 22 per cent stake, but unmistakably said it's up for grabs. United Petroleum is hoping to add to its 250 sites through a deal with fellow independent petrol retailer Freedom Fuels. The Australian Competition and Consumer Commission is asking for submissions about what the consequences could be if United gets some of Freedom's 57 sites, which are located in Queensland, NSW and Victoria. Meanwhile, Minmetals Resources chief financial officer David Lamont has flagged the possibility that the Australian arm of a Chinese company might consider purchasing assets from its parent to grow its Asia-Pacific footprint. Minmetals is currently bedding down its $C1.3 billion acquisition of Anvil Mining. Turning to equipment hire company Onsite Rental Group, the AFR reports that the number two, behind Coates Hire, could be looking for a new owner. Onsite is currently 60 per cent owned by private equity fund Next Capital but the company's growth profile apparently needs a greater capital base. And finally, Yellow Brick Road's Mark Bouris will be launching "cash-like" fixed-income products designed to seize market share from the major banks. The new vehicle, dubbed YBR Funds Management, will have a board including Yellow Brick Road's chief executive Matt Lawler, product development boss Scott Walters, Deutsche Bank Australia veteran Darren Harvey, and Rismark International's Chris Joye.