BREAKFAST DEALS: Rio's key

Extract Resources is seeking the advice of regulators as Kalahari talks to Guangdong, but attention is shifting to what role Rio Tinto will play. Hanlong is still buying Sundance stock as the target seeks to squash suggestions that insider trading investigations attached to the suitor could give the FIRB reason to pause. Elsewhere, Rupert Murdoch lost his bid for the rest of BSkyB because of the hacking scandal and now pressure is building for him to remove his son as chairman, while James Packer's exit from Challenger gets yet another twist and hedge fund Signature Capital comes up with a creative defence strategy.

Extract Resources, Kalahari Minerals, Guangdong Nuclear Power, Rio Tinto

Likely downstream takeover target Extract Resources has sought the advice of regulators concerning takeover talks at its major shareholder, Britain's Kalahari Minerals, with Rio Tinto shaping up as a key player in any transaction. Extract acknowledged the resumed talks between Kalahari and suitor China Guangdong Nuclear Power over a $1 billion takeover offer that was derailed earlier this year by the Japanese Fukushima nuclear crisis. The real prize is Extract's Husab uranium project in Namibia, expected by many to become one of the three largest uranium mines in the world, which Guangdong can get at through Kalahari's 43 per cent stake in the Perth-based company. With a stake over 19.9 per cent, Guangdong would be bound by Australian takeover laws to bid for Extract, but the last time the Chinese company was in talks with Kalahari, it asked the Australian Securities and Investments Commission if it could acquire a 'relevant' stake in Extract instead of a full takeover. The request was rejected by ASIC but nonetheless underlines the fact that the Chinese mightn't unquestioningly seek the path laid out for them. Further complicating the matter is Rio Tinto, which holds about 11 per cent of Kalahari and 14 per cent of Extract. Talk is beginning to centre on what Rio would do at the bargaining table and what the nature of a bid for Extract might be. Further, question marks are also being raised about whether Extract should have sought a trading halt sooner given that strong speculation in the British press about a resumption in talks between Kalahari and Guangdong was almost certain to put a rocket under its stock.

Still on mining, and Kagara expects to be in a giving mood this season as it works hard to offload its Lounge Lizard nickel sulphide deposit. "We want to have everything wrapped up and done and dusted, certainly before Christmas," new chief executive Geoff Day told a teleconference. Day said there might be an announcement over the next few weeks and given that Lounge Lizard is being mined on behalf of Kagara by Western Areas, which has its flagship operations in the region, it is seen as the most likely bidder.

Sundance Resources

Sundance Resources has sought to allay fears that regulators could jeopardise the $1.7 billion takeover bid from China's Sichuan Hanlong Group due to insider trading allegations, while the suitor has continued to build its stake in the target. According to documents filed to the ASX last night, Hanlong's stake in the iron ore company grew from 17.99 per cent to 18.97 per cent as media reports indicated that the Australian Foreign Investment Review Board will drag its feet on its bid for Sundance until more is revealed about the insider trader allegations levelled at three Hanlong executives, including former managing director Steven Hui Xiao and ex-vice president Calvin Zhu. The investigations into alleged transactions made by the executives in Sundance and fellow Hanlong target Bannerman Resources are being conducted by the Australian Securities and Investments Commission. The executives were stood down last month.

Sundance threw itself into a trading halt and relayed assurances passed on to it by Hanlong that it is continuing to work "productively” with FIRB and there's no reason to suggest that it won't receive approval within the timetable of the scheme of arrangement. The efforts appeared to work, with a worrying 7 per cent dive in Sundance shares easing to a less concerning 1.2 per cent decline. The shares are still well short of the bid price, but that's probably got more to do with the conditionality of the offer. Sundance and Hanlong are targeting a transaction completion date of May next year. Given that Sundance's assets sit outside Australia – the flagship Mbalam rail, port and iron ore mine project straddling Cameroon and the Republic of Congo is what all the fuss is about – there's less incentive for FIRB to stand in the way of the proposal.

News Corporation, British Sky Broadcasting

Rupert Murdoch has already watched his bid for the rest of British Sky Broadcasting fall apart, but now the media mogul is facing pressure to remove his son James Murdoch as BSkyB chairman. In the lead up to the satellite broadcaster's annual general meeting, disquiet is growing amongst company shareholders about the chairmanship of James and calls are increasing for him to be replaced with someone who is independent of News Corp, the Financial Times reports. The media company still owns 39.1 per cent of BSkyB despite its bid for the rest of the company falling apart in the wake of the News of the World phone hacking scandal. The pressure on James' position as BSkyB chairman comes as Institutional Shareholder Services urges the removal of both Rupert and James from the News Corp board itself.

James Packer, Challenger, Signature Capital

James Packer's exit from Challenger Limited, his last remaining link to the financial services industry, required a complex deal of the double back-flip tuck position variety and now objections from Challenger have turned this final chapter into a synchronised diving routine. Just recapping, Packer's CPH Holdings ended his family's near-decade long association with Challenger by cashing out 60 million non-transferrable options. To get around that non-transferrable part, CPH leant on its trusted advisors at UBS to pick up the difference between the exercise price of $3.25 and Challenger's trading price of $4.55, while agreeing to pass on the benefits of the options. However, Challenger didn't take too kindly to the unexpected presence of UBS and has successfully sought to unwind the derivative transaction to "improve transparency and control” over how management oversees its capital. Challenger persuaded CPH to exercise its options, while UBS collects an advisory fee from Challenger. And it's a perfect entry.

Speaking of odd manoeuvres, struggling listed hedge fund Signature Capital has reportedly tried to avert a board spill with some creativity, by handing over control of itself to a new ally. With a share price down 72 per cent since 2005, major shareholder Wilson Asset Management has been trying to get the board thrown out, but efforts to call an extraordinary general meeting have been fruitless. According to The Australian, Signature has handed over control to Andrew Robert's AR Management, which only took a 15 per cent stake in the company in September.

ASX, TSX, Chi-X

Fresh details have emerged about the mindset at the Australian Securities Exchange after the federal government knocked off its $8.4 billion takeover proposal from Singapore Exchange. According to the Australian Financial Review, just over a month after Treasurer Wayne Swan blocked the deal due to deficiencies in Singapore's financial system, ASX was speaking to the Toronto Stock Exchange. The report says the discussions in May did not centre on a merger proposal, but aligning their reporting codes for mineral resources. While that doesn't sound like the first step to something bigger, when you consider that the ASX has broken with tradition and enraged its long-time adviser on minerals reporting, the Australian Joint Ore Reserves Committee, by pushing for an adoption of practices more similar to Toronto, speculation of a tie-up between the two doesn't seem so far-fetched. The stakes are getting higher for ASX with new domestic competitor Chi-X just unveiling its trading fees, which will undercut the main stock exchange by 40 per cent.

And speaking of stock exchanges, there's an interesting tussle going on between the New Zealand Stock Exchange and former St Kilda coach Grant Thomas. Thomas and a business partner sold their online grain trading program Clear Grain Trading to NZX in late 2009 and the latest chapter in their subsequent tit-for-tat legal battle includes allegations levelled at NZX boss Mark Weldon of intimidation and bullying, the Sydney Morning Herald reports.

Sigma Pharmaceuticals

Sigma Pharmaceuticals is reportedly close to sealing the crucial contract renewal with its most important customer, Chemist Warehouse, which would help secure an impressive comeback for the once embattled pharmaceutical wholesaler. Sigma is a lot lighter than it used to be after offloading its pharmaceuticals business to South Africa's Aspen Pharma for $900 million in order to deal with its sizeable debt problem. But under chief executive Mark Hooper, the company has healed noticeably. It's understood that rival Symbion was trying to wrestle Chemist Warehouse away from Sigma but according to the Australian Financial Review, the important buyer is poised to sign a supply agreement with Sigma.

Stockland

Stockland managing director Matthew Quinn says the company is switching gears from acquirer to seller in an effort to reduce the company's debt position. With property prices labouring, the temptation is there for Stockland to extend its buying spree a little further but perhaps in a bearish sign for the market, Quinn says depressed asset prices are of no interest to it at the moment as the developer focusses on debt reduction and a share buyback. Speaking to the Australia-Israel Chamber of Commerce in Melbourne, Quinn went on to lay blame for the sluggish property market at the feet of government. "For reasons best known to politicians, this country has an affordability crisis. It's something that we started speaking to the government about 10 years ago but unfortunately it fell on deaf ears." Quinn said local councils get in the way of it building houses that are more cost-effective. But the developer has won some good news from one council with Maitland City giving the green light to a $350 million expansion of the Green Hills shopping centre in New South Wales, the Maitland Mercury reports.

Proserpine Sugar

Tully Sugar's Chinese owner COFCO has suffered another blow in its quest to win over one of the last Australian-owned players, Proserpine Sugar, with an independent expert reportedly rejecting the proposal. Proserpine had already indicated that it prefers an offer from Sucrogen, formerly part of CSR and now controlled by Singapore's Wilmar. Although Sucrogen chief executive Ian Glasson recently gave growers a stern warning that there isn't another offer coming if they vote this $115 million deal down. But COFCO has other things to worry about, with the Australian Financial Review reporting that Proserpine's independent adviser BDO Corporate Finance has given the Chinese company's proposal the thumbs down due to "material legal uncertainty”.

Wrapping up

The Nathan Tinkler-backed Aston Resources has booked its first net profit (of more than $240 million), thanks largely to the sale of a 15 per cent stake in its Maules Creek coal project to Japan's Itochu. Also in coal and Guildford Coal, which is currently mulling an IPO for its Mongolian operations and pushing for production to be shipped through Townsville, is about to announce a maiden joint ore reserve at its Galilee Basin project, the Australian Financial Review reports. Still in the mining sector, Australia Minerals and Mining Group has scooped up Minemakers' 80 per cent interest in one of its Western Australian magnetite operations, West Southdown Project, bringing its existing interests in the area to 13. And finally in retail, just a month after Satch Clothing was placed in the hands of administrators, it has been handed to liquidators following a terrible period for Australian retail that's seen a number of chains falter.