BREAKFAST DEALS: Reaching for Southern Cross

Nine Entertainment has reportedly proposed some legislative amendments to get around the reach rule so a Southern Cross Media merger can become a reality – but that probably won't be on the cards in the near-term given the state of things in Canberra. Parmalat has warned farmers of the Murray Goulburn Co-Op deal with Coles, which probably isn’t surprising given that they’re the ‘middle men’ Wesfarmers is targeting. Elsewhere, Murchison is inching towards a buyback and China’s ASX-listed Norton Gold Fields looks to make a purchase.

Nine Entertainment, Southern Cross Media

Nine Entertainment boss David Gyngell is reportedly still pushing for the reach rule to be either removed, or its grip to be loosened.

The broadcaster was in talks with Southern Cross Media about a potential $4 billion tie-up. After the government’s media reforms hit a brick wall within federal Labor, a report emerged that Gyngell was speaking to UBS about selling some of Southern Cross’s licences to stay within the 75 per cent reach rule.

That would be somewhat self-defeating and a full merger would no doubt be at the forefront of Gyngell’s mind. The Australian has obtained a copy of Nine's submission to the Senate inquiry into the proposed media reforms where Nine makes a few recommendations that, unlike previous proposals, would be legally enforceable.

One idea is to simply dump the reach rule. Another is to make it mandatory that any company surpassing the 75 per cent reach rule must have 22 minutes of news between 5pm and 8pm in each regional and local market.

It’ll be interesting to see if we get any leaks from the discussions between Nine and current regional affiliate WIN Television. If WIN loses Nine to Southern Cross, it’s most logical dance partner is Ten Network, thanks to its owner Bruce Gordon being a major shareholder and board member.

Given the current state of the parliament, the legislation is unlikely to pass before the election so this discussion is largely hypothetical.

But since the Coalition has shown some sympathy for the players that want the reach rule abolished, it’s worth considering Nine’s proposal.

The central argument to the abolishment of the reach rule is that online media breaks down geographic boundaries. This very article can be read as easily in Sydney’s Bondi Beach as it can be on Western Australia’s Sunset Beach.

Abolishing the reach rule while enshrining news content floors for free-to-air broadcasters would be an easy legislative target for the networks down the road. It's an uneven playing field.

We all know free-to-air television doesn’t work that way. It took Nine 45 years to dump Days of our Lives.

Parmalat, Murray Goulburn Co-Op, Coles

Australia’s second largest milk processor has joined supermarket giant Woolworths by issuing warnings to farmers about the supply deal that Murray Goulburn has struck with Wesfarmers.

Speaking to The Australian Financial Review, Parmalat chief executive Craig Garvin says the strategy could be “very divisive and very disruptional”, adding that he believes farmers “should be nervous”.

“There’s a lot of scepticism among farmers and they’re really now starting to look through this deal and what’s really in it,” he told the newspaper.

Garvin’s argument appears to concede that Victorian farmers that already supply Murray Goulburn will get a good deal as it moves into the fresh milk business with two plants for a cost of $120 million. But he raised the issue of Murray Goulburn having to source more milk from Queensland and New South Wales to reach its 200 million litre target, adding that he remains “sceptical” about whether “new farmers” will win off this deal.

The prospect of more supply is hardly surprising; the co-op’s leader Gary Helou has stated the processing facilities will be scalable.

Both Parmalat and Lion have invested heavily in establishing big brands in Australia, but the major supermarkets have captured a lot of consumers with cut prices.

Woolworths, which is currently in negotiations with Parmalat, has similarly raised concerned about the Coles deal.

Murchison Metals

The once aspiring iron ore port and rail developer Murchison Metals has delayed the completion date of the independent expert’s report into its wind down.

Murchison issued a statement to the ASX yesterday that the draft documentation for shareholders to consider a buy-back at 4.0-4.2 cents a share is “largely completed”, but the independent expert’s timetable has been postponed to early May from mid-to-late April.

Legendary corporate raider Sir Ron Brierly snapped up a portion of the Murchison register late last year following criticism that Murchison’s wind-down was too expensive.

Though his new vehicle Mercantile Investment Company, Sir Ron called for the removal of chairman Ken Scott-Mackenzie and managing director Greg Martin so that his own executive director Gabriel Radzyminski and independent in Paul Jensen could take over the wind down. He got his wish a few days later.

Murchison has since moved slowly towards the end of the road a mere shadow of its former self.

“The directors are focused on the costs of operation, and following the relocation of the company’s registered office to Sydney, all staff have been made redundant and there are no employees,” the company said yesterday.

“Costs have been reduced to the minimum level possible.”

Western Australian Premier Colin Barnett recently said that a royalties payment reprieve for magnetite iron ore miners was in no small way designed to rekindle the shelved Oakajee port and rail plans.

“…Let's face it, Australian policy out of Canberra to China on mining has been awful,” said Barnett last week.

“What I'm trying to demonstrate is that Chinese investment is welcome here and we'll take a partnering approach.”

Oakajee was shelved for reasons well beyond Canberra’s fiddling. But as the only state really holding Australia’s economic growth up, we’ll let him have the point.

Wrapping up

Norton Gold Fields, majority-owned by China’s largest gold company Zijin Mining Group, is in a trading halt ahead of an announcement regarding some kind of acquisition.

The Wall Street Journal reports that Kalgoorlie Mining Company is the target, with a market cap of $6.5 million. Given that Kalgoorlie also went into a trading halt, that’s a pretty safe bet.

Staying with mining, Fortescue Metals Group has awarded UK-based Global Surface Mining a $160 million contract for its Christmas Creek iron ore project in the Pilbara, which is a two-year extension.

And finally, Downer EDI has refinanced its $420 million syndicated credit facility by splitting into a two tranche $400 million facility.

The deal was originally set for $350 million and was oversubscribed by $100 million. The banks arranging the transaction were ANZ Banking Group, Mizuho Corporate Bank, National Australia Bank and The Royal Bank of Scotland.