BREAKFAST DEALS: Qantas touchdown

Qantas looks set to beat rival Virgin in their respective deals pursuits, while Sichuan enters negotiations with Sundance after missing its bid deadline.

Qantas Airways could get final approval from the ACCC to align itself with Emirates, but Virgin Australia is still waiting for its Tiger nod. Sundance Resources now has five business days of legally enforceable pleasantries that it needs to get through before it can extricate itself from the Hanlong Mining deal. Meanwhile, UGL shares have staged a comeback on its demerger investigations and iconic Australian clothing maker RM Williams is up for sale.

Virgin Australia, Skywest Airlines, Tiger Australia, Qantas Airways, Jetstar

With its senior rival thought to be within days of securing final approval for an alliance with a Middle Eastern aviation giant, Virgin Australia isn’t having as much luck with the Australian Competition and Consumer Commission.

Yesterday, Virgin received approval from the High Court of Singapore for its purchase of Singaporean-owned, Perth-based Skywest Airlines, but the purchase of a 60 per cent stake in Tiger Airways remains elusive.

“[The Virgin deal] is a very complex matter, whereas Jetstar started out complex and got simple,” said ACCC boss Rod Sims, according to Fairfax Media.

Qantas’s low-cost arm Jetstar has just won approval from the ACCC to co-ordinate rather than compete with sister airlines operating in Singapore, Japan, Vietnam and Hong Kong. Approval for the Emirates alliance could come as soon as today, with an official launch planned for Sunday.

Virgin Australia boss John Borghetti has threatened to walk away from the Tiger deal as gaps open up between the support Virgin is prepared to guarantee for Tiger’s fleet and what the consumer watchdog demands.

While the overall level of competition in the Australian aviation market is Sims’s primary concern, the nature of these two deals is very different.

Qantas is linking up with a powerful international player, but it’s only an alliance. Virgin is dealing with an embattled player, at least in the Australian market, but it’s securing majority control of it.

Sundance Resources, Sichuan Hanlong Mining

As expected, embattled Chinese suitor Sichuan Hanlong Mining has failed to come up with the credit-approved term sheet from China Development Bank and China Everbright Bank to purchase Sundance Resources for $1.3 billion.

Sundance informed the market yesterday that the deadline has been missed and the two companies will now enter five business days of “good faith negotiations”.

“If the parties fail to reach agreement during that period, either party may then terminate the scheme of arrangement,” said Sundance. D-Day is April 3.

The only question now is who will do the honours of finally ending this deal that’s been on the go for two years.

The Australian understands that it probably won’t be Hanlong because it’s seeking yet another deadline extension from Sundance.

The target is unlikely to keep entertaining this deal, which has now been thrown into simply unacceptable doubt with the detainment of the suitor’s chairman Liu Han in China, reportedly in relation to hiding his brother who is supposed to be a 'major murder suspect' according to Chinese media.

UGL

UGL shares staged a much-needed recovery as the company announced that a demerger of its property services arm is on the table.

Managing director Richard Leupen told investors that the “review” of the company’s corporate structure is expected to be completed by its full-year results on August 12, “if not earlier”. The stock surged 12 per cent.

Chairman Trevor Rowe added that if the company decides to split the engineering and property services business up, Leupen would stay on beyond his current contract, which ends on March 31 next year, for the transformation.

UGL started taking a dive in the middle of February, which was quickened on February 27 when the company announced a 45 per cent decrease in earnings before interest and taxation for the six months to December.

With property services not the company’s traditional earnings base, contributing almost 50 per cent of UGL’s earnings, talk began almost immediately for a demerger. Now the board has acted. Goldman Sachs has been brought in to advise. 

The news appears to put a full stop to Leupen’s talk from September last year about acquisitions in the property services sector. A demerger is enough to handle.

RM Williams

Iconic Australian clothing company RM Williams has been put up for sale with expectations that it could generate $100 million.

Domestic and international suitors have reportedly expressed interest in the maker of classic Aussie bushwear and boots, which is somewhat encouraging given the beaten down state of Australian manufacturing.

Executive chairman Ken Cowley, a former chief of this website’s publisher News Limited, announced the company is “assessing external commercial growth and expansion plans” following reports that RM was being prepared for a sale.

Ramsay Health Care, Sime Darby

Ramsay Health Care is pushing harder into Indonesia with a $500 million joint venture with Malaysia’s Sime Darby.

Ramsay managing director Chris Rex said the company has been aware of the potential growth in Asia due to its rising middle class and ageing population for some time. The Australian private hospital operator already has two hospitals in Jakarta and one in Surabaya, acquired in 2005.

“This deal with Sime Darby presents a significant opportunity for Ramsay to expand its quality portfolio of hospitals in Asia and apply its proven healthcare management expertise, with a company that has extensive experience in the Asian marketplace,” said Rex.

The deal will put Ramsay’s Indonesian hospitals with Sime Darby’s Malaysian hospitals under the one roof, which will be called Ramsay Sime Darby Health Care.

Ramsay says the combined company will then look to expand in southeast Asian and “eventually throughout the whole region”.

Wrapping up

RiverCity’s lenders have given the go-ahead to a $600 million sale of the Clem Jones Tunnel, according to The Australian Financial Review.

The next step is to get approval from their credit committees, with a sale process slated for the end of April.

Meanwhile, construction company Transfield Services has picked up a National Broadband Network fibre rollout contract worth up to $170 million for the New South Wales rollout.

Elsewhere, junior explorer Mindax has inked a deal with Hong Kong’s Perpetual Mining to sell up to 51 per cent of direct shipping from its Mount Forrest project in Western Australia, along with 49 per cent of magnetite rights.

The $50 million deal comes a year after two Chinese directors tried to roll managing director Greg Bromley, who later resigned, over a $115 million agreement with Japan’s Sumitomo that they believed didn’t adequately value the magnetite.

Meanwhile, AMP Capital has increased its stake in Australian Pacific Airports Corporation to 45.3 per cent after exercising pre-emptive rights over Australian Infrastructure Fund’s share of the airports, which were tied up in the $2 billion deal with the Future Fund.

Cash Converters has secured a $60 million securitisation deal from Westpac Bank that the second hand dealer and short-term lender it will use to grow its own loan book.

And finally, the federal government has sold $250 million in Treasury bonds slated for August 20, 2010. It generated a coverage ratio of 3.5 times and an issue yield of just 0.69 per cent.

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