BREAKFAST DEALS: Qantas persuasion

Qantas flexes its muscle to the ACCC, while QR National awaits its Queensland budget fate.

The consumer watchdog has been left beyond doubt that Qantas Airways will reduce flights to Europe if its Emirates alliance is blocked. Seven West Media is next in line for news from the ACCC with a decision on Consolidated Media Holdings due later this week. Meanwhile, many eyes are on the Queensland budget for news of the QR National stake, New Zealand’s Fisher & Paykal has a deal from China in the works and a Fortescue-Roy Hill tie-up is more likely than you might think.

Qantas Airways, Emirates

Qantas Airways has made it clear how it intends to persuade the consumer watchdog into approving its alliance with Emirates: ‘Do it, or watch flights to Europe disappear’.

The flying kangaroo is proposing a 10-year alliance with the Middle Eastern carrier, which would see its flights to Europe run out of Dubai instead of Singapore.

The carrier incurred a $450 million loss on its international business, of which its European flights are a key problem.

The language that Qantas has used in its submission to the Australian Competition and Consumer Commission could hardly have been clearer.

"The growing magnitude of losses cannot continue,’’ the submission said. "The proposed conduct will arrest the terminal decline of the international operation of Qantas.

"It is clear that it is no longer possible for Qantas international to sustainably ‘go it alone’ as an international network carrier.”

At the moment, Qantas can get you to London for about $2800, but Emirates can do it for about $500 less.

Qantas has to convince the ACCC firstly that those $2800 fares are not sustainable and that aligning with Emirates won’t result in those cheaper fares rising too much.

While most of the attention will be on the flights to Europe, Qantas has also said it would be prepared to guarantee that Trans-Tasman flights would be maintained at current capacity.

Seven West Media, Consolidated Media Holdings, News Limited

Speaking of the ACCC, Seven West Media is expecting to hear from the consumer watchdog on Thursday whether there are any problems with it increasing its stake in Consolidated Media Holdings.

CMH is of course majority owned by billionaire James Packer and the subject of a $3.45 takeover offer from News Limited. The $1.94 billion proposal is slightly lower than the $3.50 offer that was touted when talks originally commenced.

Seven West billionaire Kerry Stokes is well known for his desire to get a foothold in the pay TV market and CMH has a 25 per cent stake in Foxtel and 50 per cent stake in Fox Sports Australia.

From the beginning, analysts have cast doubt on the idea of Stokes countering the News Limited proposal with an offer of his own.

It’s far more likely that the 71-year old will use his blocking stake to push the offer back upwards, or gain some kind of strategic advantage from the Fox Sports asset.

News Limited would own 100 per cent of Fox Sports Australia if the deal went through.

And while we’re on television, a debt-for-equity swap deal has reportedly been properly presented to the company’s US hedge fund lenders, which officially kicks off the long-awaited ownership transfer process.

QR National

Today is a big day for the state of Queensland, with Premier Campbell Newman and Treasurer Tim Nicholls set to hand down their first budget.

While much of the media attention this morning is focused on the potential increase in the coal production royalty, which has been cleverly preceded by job cuts from the miners, the market will be looking for hints about the fate of QR National.

The Queensland government holds a $2.8 billion stake in QR National and Newman has made it abundantly clear that he’d love to sell it down to start paying down the state’s debt burden.

The government selling restriction on the shares expired last month and with no announcement about a pending sell down, the market quickly turned its attention to today’s budget.

A quickie sale is unlikely, there’s a lot of value to be either realised or squandered depending on how Newman and Nicholls handle the sale.

Additionally, given the increasing surprise amongst residents of the sunshine state to the extent that Newman looks to be cutting into Queensland’s spending, the premier will need every last dollar.

Fisher & Paykal, Haier

Duel-listed Fisher & Paykal has effectively put itself on the market following talks with major Chinese shareholder Haier.

F&P’s Australian-listed shares rocketed 30 per cent to 75.5 cents a pop after the company said it was in discussions over a possible cash offer. No price was released, which means that 30 per cent price surge looks about right when you consider the average takeover premium.

Haier, which owns about 20 per cent, requested limited commercial and financial due diligence. F&P handed over an extract from the company’s secret five-year corporate plan, which was then released to the market after Haier said it would be speaking to three of the next largest shareholders.

Orbis Investment Management owns about 17 per cent of the register, with Accident Compensation Corp holding 8 per cent and AMP Capital Investors 5 per cent. If Haier were able to secure the support of all three, it would be within striking distance of majority control.

Fortescue Metals Group, Roy Hill

A close watcher of resources billionaire Gina Rinehart says a tie-up between her Roy Hill deposit and Andrew Forrest’s Fortescue Metals Group is not such a far-fetched idea.

Fairfax’s Adele Ferguson is Rinehart’s unofficial biographer and is uniquely placed to comment on the billionaire’s efforts to get Roy Hill off the ground amid slumping iron ore prices.

Ferguson says sources indicate that both companies could save more than $1 billion in infrastructure was shared. At the moment, Rinehart is planning on building her own train line at a cost of $2 billion, but contractors are being prepared for delays as the iron ore price hovers below $US90 a tonne.

Fairfax understands that Fortescue talked about the tie-up idea at a board level "on a number of occasions over the past three years”.

Despite the cost savings, Rinehart is said to have rejected the most recent attempt to discuss the idea.

Wrapping up

Garage door maker Alesco Corporation says the offer from DuluxGroup remains "materially inadequate” after the suitor attempted to speed up the acceptance of its takeover offer last week.

Dulux said that payments to accepting Alesco shareholders would be sped up and the offer would go unconditional once it had secured a simple majority.

Unsurprisingly, the Alesco board concluded that this doesn’t actually improve the offer – because it doesn’t – and this length dance continues.

Meanwhile, logistics group Transfield has received the somewhat mixed blessing of providing services for the new asylum-seeker detention centre to be re-opened in Naura. Immigration Minister Chris Bowen said the contract will cover catering, cleaning, security, transport and facilities.

Meanwhile, BHP Billiton has teamed up with British energy giant BG Group for a contract to explore a deepwater block in the Mumbai basin. The pair’s consortium won the bid in the ninth auction round in India.

And finally, Dublin-based Mainstream Renewable Power has signed a $76 million loan agreement with Macquarie Group to fund the company’s push in offshore wind farms.

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