BREAKFAST DEALS: Rio creep

Rio Tinto dampens speculation of an Ivanhoe takeover offer, while a tranche of Nine's debt finds a new home.

As global markets splutter towards the end of 2011, fearing the worst from Europe, Rio Tinto has thrown cold water on the idea of bidding for Ivanhoe Mines now that it’s won arbitration proceedings. It’s highly likely that Rio will now creep to majority ownership of Ivanhoe and the prospect of forking out a few billion dollars in this environment probably isn’t a good idea in the first place. Meanwhile, it looks like another Nine Entertainment lender has offloaded its stake to the hedge funds, giving CVC Asia Pacific more reason to be nervous. Elsewhere, market uncertainty doesn’t seem to scare Nathan Tinkler, whose thoughts are turning international. Finally, Morgan Stanley has won the financial adviser job for the NSW Port Botany privatisation and Queensland’s coal port ambitions have swollen.

Rio Tinto

Shares in Ivanhoe Mines were smashed overnight as Rio Tinto let it be known that it’s not considering a full takeover offer at this point. As of January 19, Rio’s 49 per cent stake in its Canadian Oyu Tolgoi partner will no longer be stuck in a standstill agreement reached in 2006. "Rio Tinto may seek opportunities to increase its shareholding in Ivanhoe to a majority position but currently has no intention of making a full takeover bid for Ivanhoe’s shares. Rio Tinto reserves the right to change its intention in the future.”

That news raises the prospect that Rio will seek to obtain majority control of the company so it can shape the Oyu Tolgoi project once the January deadline passes, but a shareholder premium that would arise from a takeover offer is not on the cards at the moment. After the share price tumbled 15 per cent overnight, Ivanhoe is still worth $C13.3 billion ($12.8 billion) and the remaining 51 per cent would still cost Rio $6.8 billion. Of course the miner didn’t rule out a bid later on, but the announcement certainly caught speculators out.

The statement follows news that an arbitrator has decided that Rio’s stake in Ivanhoe cannot be diluted if it increases its stake – a ‘poison pill’ ostensibly designed to maximise shareholder value, but which ultimately makes a takeover very unattractive. And while we’re in Canada with Rio, the company announced an extension to its $C654 million bid for uranium explorer Hathor Exploration – owner of the highly rated Roughrider deposit – until December 22. The acquisition is well on the way, with Rio securing 84.26 per cent acceptances thus far.

Nine Entertainment, CVC Asia Pacific

Another large portion of Nine Entertainment debt is reportedly set to find a new owner after BOS International sold its $127 million slice. According to The Australian, BOS International, a unit of Lloyd’s Banking Group, has offloaded its share and the speculation is that one of the two hedge funds controlling a large part of Nine’s debt, Oaktree Capital and Apollo Global, has claimed it. Nine’s owner, CVC Asia Pacific, has been scrambling to try to refinance its $3.6 billion debt burden with limited success.

It was thought that the two hedge funds had about 50 per cent of Nine’s $2.7 billion in senior debt, but The Australian hints that figure could be closer to 60 per cent. Further, the newspaper brings word from a source that the hedge funds could be able to exercise "positive control” over Nine’s restructuring once they captured two-thirds of the debt. What that means is obviously a bit vague, but it implies that plans made by CVC Asia Pacific’s Andrew Mackenzie to refinance Nine’s debt would be revised somewhat under such a scenario.

Aston Resources, Nathan Tinkler, BHP Billiton

In coal news, Aston Resources chairman Nathan Tinkler is reportedly set to look overseas for his next big deal, presuming his company’s $5.1 billion merger with Whitehaven Coal goes through. "My interest in coal is expanding a lot further, a lot more outside of Australia,” Tinkler said according to Bloomberg. "I'm seeing a lot more opportunities overseas these days than in Australia and I want to be free to pursue those.” There’s an outside chance that Tinkler’s plans could be put on hold in the event that a rival bidder comes in to spoil the party, which is a scenario that analysts are refusing to rule out.

Meanwhile, BHP Billiton will lend a hand to a group of investors led by Pembani Group to purchase an 8 per cent stake in its South African coal unit. The miner did not disclose what the stake in BHP Billiton Energy Coal South Africa (known as Besca) was worth. Pembani is also known as Worldwide African Investment Holdings, which represents the interests of black South Africans. Companies in South Africa are required by law to hit black ownership targets, to strengthen the investment relationship between black people in the former apartheid country and major companies. By 2014, companies will be required to have at least 26 per cent black ownership.

Dudgeon Point, Port Botany

The NSW government has selected Morgan Stanley as the financial adviser for its $2 billion privatisation of Port Botany, according to The Australian Financial Review. The newspaper says the investment bank beat off presentations from fellow short-listed candidates Royal Bank of Scotland, Rothschild and Merrill Lynch. Speaking of governments and ports, it looks like Queensland coal companies will have access to more port capacity thanks to state government efforts to increase its existing ambitions at Dudgeon Point. The Bligh government had already flagged a new coal port at Dudgeon, north of existing coal port Dalrymple Bay, but The Australian reports that the capacity has been set at 180 million tonnes. Previously, Dudgeon Point has been described as a supplement to Dalrymple, which has capacity for 85 million tonnes. India’s Adani Group and Canada’s Brookfield Infrastructure Group have been selected as preferred operators for the $10 billion project, which will be announced today.

Fairfax Media, Trade Me

Former Fairfax Media boss David Kirk says the hassle-free float of New Zealand auction and classifieds business Trade Me vindicates his decision to pick up the business five years ago. Trade Me made its debut on the New Zealand and Australian exchanges yesterday at $NZ2.70 and $2.20 respectively, and finished at $NZ2.90 and $2.20, respectively. Speaking to Fairfax, Kirk was happy to remind analysts that questioned his decision to pick up the business for $NZ700 million, which now boasts a market cap of $NZ1.07 billion. "It was questioned from a price point of view,” Kirk told Fairfax. "People thought it was very expensive.” There’s been no word recently of whether John Singleton and Mark Carnegie have made any progress putting together a deal for Fairfax’s metropolitan radio assets – maybe in the New Year.

Grenda Corp

Melbourne’s Grenda family has added to its $400 million sale last month of Grenda Transit Management, a 650-vehicle business, by offloading a stake in its Volgren bus building business. According to media reports, Grenda Corp is believed to have picked up $100 million by selling a stake in the business to Brazil’s Marcopolo. The company will retain a 25 per cent stake in the business, which has more than 40 per cent of the Australian market.

Wrapping up

Namibian uranium miner Bannerman Resources is in a trading halt ahead of a capital raising announcement. It’s been reported that the raising will be priced at 22.5 cents a share, showing just how likely management thinks a 61 cents a share indicative proposal from Sichuan Hanlong Group is at getting up. Meanwhile, iron ore miner Fortescue Metals Group has handed a $30 million contract to Decmil to build an airstrip and associated facilities at its Christmas Creek mine.

In gold, The Australian Financial Review understands that Newcrest Mining has finished off its documents needed to list on the Toronto Stock Exchange in mid-February. And Mako Energy has sold an 80 per cent interest in its Duvernay Shale and Rock Creek acreage assets in Canada to an undisclosed party for $C20 million.

Elsewhere, executives from China’s Bright Foods are reportedly in New Zealand touring the facilities of Griffin Foods, The Australian Financial Review reports. Bright Foods is shaping up as the likely victor having secured final regulatory approvals for the $530 million deal with the owners Pacific Equity Partners. And finally, Champ Private Equity has confirmed it will lob a $163 million bid for outdoor advertising firm oOh!media Group.