BREAKFAST DEALS: Rio pulls rank

Rio Tinto engineers a change of leadership at Ivanhoe Mines, while the silver donut eyes a big Asian bite.

Rio Tinto has finally managed to convince billionaire Robert Friedland to stand aside at Ivanhoe Mines with a $3.3 billion financing deal. The installation of a Rio executive at the top of Ivanhoe caps off a long and often tense battle with the Canadians for control of the Mongolian Oyu Tolgoi copper-gold project. In financial services Macquarie Group is said to be in the running for ING’s Asian asset management business. Macquarie is also in the news at Coalworks, having lost patience with its chairman and chief executive. Elsewhere, the Genworth Australia float has been shelved until next year, disappointing investors far and wide, and it’s Telstra’s big buyback day.

Rio Tinto, Ivanhoe Mines

Ivanhoe Mines billionaire Robert Friedland has agreed to resign as chief executive and director as part of a financing agreement with Rio Tinto that will help fund the $10 billion Oyu Tolgoi copper-gold project in Mongolia. Friedland’s resignation, along with six other directors and four senior managers, comes just a few months after Rio secured majority ownership of the Canadian miner.

Rio’s copper chief financial officer Kay Priestly, a director of Ivanhoe, will take the interim CEO duties, while Ivanhoe’s Catherine Barone takes over from the outgoing CFO Tony Giardini. The size of the board will be reduced by one, with Rio set to name six nominees for the board, four of them independent, within the next five business days.

Ivanhoe will proceed with its planned $US1.8 billion equity raising, while Rio will offer a $US1.5 billion bridge facility to ensure that construction of Oyu Tolgoi continues uninterrupted up until production. Rio will also throw its weight behind negotiations to secure a $US3-$US4 billion finance package with international lenders. Ivanhoe has been speaking to these lenders since 2010 – Rio’s muscle could really get things moving.

Further, Ivanhoe says it remains engaged in "active and detailed negotiations” over potential sales of other assets. The idea is that Ivanhoe would gradually sell down its peripheral assets to pay for Oyu Tolgoi.

Macquarie Group, ING Asia

Australian investment bank Macquarie Group is reportedly in the race to pick up ING’s Asian asset management business. Reuters brings word from sources that indicate the silver donut is competing against Japan’s Nikko Asset Management, among others, for the business. The report indicates that the deal could be worth up to $US600 million ($578.9 million). There’s a bit of a pattern here, given Macquarie recently had a crack at the asset management arms of Deutsche Bank.

While we’re on banking in Asia, one of Australia’s most senior banking executives with serious experience in China reportedly believes there’s a strong chance of a major Chinese lender picking up a cornerstone stake in one of our big four banks within a few years. The Age is carrying an interview with Mike Pratt, recently retired boss of Standard Chartered’s business in China, who says it’s "highly possible” that a major Chinese player will take a stake of up to 15 per cent in a major Australian bank this decade.

ANZ Bank would make the most sense, given its super-regional bank strategy. But Commonwealth Bank’s increasing engagement with Asia would mean that it certainly wouldn’t be a one-horse race.

Macquarie Bank, Coalworks, Boardwalk Resources

Back to the silver donut, Macquarie Bank has snapped at the senior ranks of Coalworks, calling for a shareholder meeting to oust chairman Wayne Mitchell and chief executive Andrew Firek. It’s seeking to replace the pair with its own director nominees, Anthony Ferguson and Johann Jooste-Jacobs. The Australian Financial Review reports that Macquarie raised concerns with Coalworks in April about the allocation of 6 per cent of the company’s issued capital to Hong Kong’s Noble Group.

The move also comes just days after Whitehaven Coal agreed to acquire Boardwalk Resources – which holds 19.9 per cent of Coalworks – as part of its deal with Aston Resources. Shareholders approved the deal earlier this week and the Federal Court of Australia gave its blessing yesterday.

Genworth Financial

Genworth Financial will not float 40 per cent of its Australian business in 2012 after a deterioration in payouts of the business. Genworth Australia had been slated for a second quarter IPO worth about $850 million, valuing the whole business at around $2 billion. But equity market watchers will have to wait until the end of the year for TRUenergy’s float, courtesy of Hong Kong’s CLP Holdings, for a real IPO test.

Genworth Australia enjoyed earnings of around $40 million each quarter for all of last year but looks like making a "modest” first quarter loss in 2012. The insurer said that the Queensland floods have hurt its delinquency levels somewhat, although it should be pointed out that other insurers have managed to get on top of their sunshine state liabilities.

Telstra Corporation

Telstra Corporation is expected to unveil its long-awaited capital management plan, paid for by the proceeds from the $11 billion NBN deal. But investors are being urged not to get too excited, speculation of a special dividend has been killed off and hopes for a big-time share buyback are being checked.

Analysts are pointing to a $2 billion buyback program to be conducted into 2015. It’s also worth remembering that in the likely event that the Coalition wins the next election another round of negotiations could be on the cards. Telstra will be keeping this in mind.

Westfield Group, Starwood Capital Group

Australian shopping centre giant Westfield will offload eight sites in the US for $US1.15 billion ($1.11 billion) so it can reduce its debt burden and invest in other assets. Westfield said majority interests in seven of those sites – two in Chicago and one in Lincoln, San Francisco, Fairfield, Cleveland and Miami – will go to Starwood Capital Group, while the Eastland site in California will go in a separate transaction for $US147 million. It’s expected the second deal will be sealed within 90 days.

This is part of Westfield’s ongoing strategy to divest non-core assets to pay down debt, invest in better returning sites and increase return on equity. Business Spectator’s Stephen Bartholomeusz wrote on this issue in February.

Sundance Resources, Sichuan Hanlong Group

Sundance Resources could finally be getting close to winning approvals with the governments of the Republic of Congo and Cameroon, paving the way for a $1.8 billion takeover offer from China’s Sichuan Hanlong Group. The Australian Financial Review understands that the Congo deal just needs to be put to paper, while the Cameroon deal is progressing more slowly but its "substantially complete”.

Approval from both governments is a condition of the Hanlong bid at 57 cents a share because their target is the Mbalam iron ore project, which straddles the border between the two. Shares in Sundance have been trading at a significant discount to the deal amid market scepticism that it’ll get up. Shares closed yesterday at 46.5 cents a pop.

Stockland

Speaking of share buybacks, it’s speculated that Stockland Group might conduct one of its own if it can successfully get away its industrial portfolio. The Australian Financial Review understands that talks with Singapore’s Mapletree have taken a remarkable turn for the better and it’s in prime position in win the $821.7 million business. Some have asked whether Stockland might use the proceeds for a takeover, but the market is generally leaning towards a buyback.

Wrapping up

Murchison Metals has finally stopped the search for possible acquisitions or investments and announced that it’ll return what it can from the Oaktree Port & Rail stake sale to shareholders. Murchison almost collapsed under the weight of its funding obligations for Oaktree and received $325 million from partner Mitsubishi in exchange for its 50 per cent stake. Murchison says it has about $223 million left after settling some debts.

The competition regulator is reportedly having a look at Ten Network’s planned sale of its outdoor advertising business EYE Corp. The ACCC is apparently examining some of the competition implications of any deal, given that the three parties interested in it – oOh!media, APN News & Media and France’s JCDecaux – are rivals, The Australian Financial Review reports.

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