BREAKFAST DEALS: Rio's new rivals?

Rio Tinto's $3.9 billion takeover bid for Riversdale Mining takes an interesting turn as the target's Brazilian shareholder CSN raises its stake, and while the move makes things tricky for the suitor it doesn't necessarily derail the deal entirely. Meanwhile, more trouble for Rio in Guinea and its Simandou iron ore project. Woolworths hires a head hunter to find a replacement for chief Michael Luscombe and could his departure spark a mass exodus? Elsewhere, global bourse consolidation gathers pace as the Germany's Deutsche Boerse and the NYSE Euronext eye a heavyweight merger, OZ Minerals rewards its loyal shareholders but keeps enough firepower for any acquisitions and Rupert Murdoch looks set to buy the rights to MasterChef with a 700 million deal to buy daughter Elisabeth's TV production house Shine.

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Rio Tinto, CSN, Riversdale Mining

Rio Tinto's $3.9 billion bid for Riversdale Mining just got a little more interesting after the target's Brazilian shareholder Companhia Siderurgica Nacional (CSN) moved to increase its stake from 16.3 per cent to 17.6 per cent. CSN has reportedly paid around $76 million at an average cost of $15.96 a share and interestingly it's the only shareholder on Riversdale's register yet to make a public comment on Rio's ambitions on the coal miner. India's Tata Steel, which holds a 24.36 per cent stake in Riversdale, has indicated that it is happy to see Rio Tinto take control of the miner. Riversdale shares dipped below Rio's $16 a share to $15.85 on the news as some investors believed that CSN's move could derail Rio's bid. That may be a bit farfetched at the moment but it certainly does make things tricky for Rio. CSN has shelled out the $76 million to essentially give itself a better bargaining position to presumably squeeze out a better price from Rio and even more importantly, put in itself in a position to negotiate an offtake agreement once the takeover is complete. Unlike Tata Steel, CSN doesn't have an offtake agreement for the coal set to come out of Riversdale's mines in Mozambique. It's unlikely that CSN wants to block Rio's advance given that the mining giant is probably its best bet to get those mines up and running as quickly as possible. There's a fair chance that CSN could now sell its stake to Rio, for a very slight profit, with the Brazilians more concerned with winning access to Riversdale's coal than making a hefty profit. The move adds an extra layer of intrigue on the eve of Rio Tinto's full year results and things could get complicated if Tata Steel and CSN both decide to sit on their combined 42 per cent stake in the target. That would mean that Rio would have to win acceptances from almost all of Riversdale's remaining shareholders to win its prize, including US hedge fund Passport Capital. Passport, which holds a 14.6 per cent stake in the miner, has agreed to sell a 7.9 per cent stake to in Riversdale to Rio as part of the miner's option to take a 14.97 per cent stake as soon it declares its offer unconditional. With Rio's shareholders clamouring for more of the miner's spare cash to be returned to their pockets, the miner needs to ensure that its first big acquisition since Alcan goes as smoothly as possible.

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Rio Tinto, Simandou

Meanwhile, there's some news for Rio Tinto on the iron ore front and more fears about the miner's Simandou project in Guinea. According to The Australian Financial Review, Rio's development plans are under threat after the West African country's new mining minister, Mohamed Lamine Fofana, said that his government is looking to lift its interest in all mining projects in the country from 15 per cent to 33 per cent. Mr Fofana has told the paper that he is set to meet with Rio officials next week to discuss the proposed changes to the country's mining code. The changes could potentially cut Rio's stake in the Simandou project from 40.3 per cent to 33.7 per cent. The miner has already agreed to give the Guinean government an option to take a 20 per cent stake and it also shares the project with Chinese partner Chalco – a subsidiary of Chinalco – and the International Financial Corporation. Rio has already spent $US700 million on the project.

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Woolworths, Michael Luscombe

It turns out Woolworths boss Michael Luscombe's musings about a retired life were not empty philosophising after all but rather a hint of things to come. Woolworths has reportedly hired headhunters Egon Zehnder to find a replacement for Luscombe who plans to step down at the end of this year. The appointment of Egon Zehnder would indicate that Woolies board wants to run the succession process by the book. Luscombe all but anointed the director of the retailer's supermarkets, liquor and petrol division, Greg Foran,as his successor in his interview with the Australian Financial Review last weekend, but it would seem that the management would like to take a look at external candidates. What had a started as an exercise in placating speculation on Luscombe's future with the retailer has unfortunately sent Woolworths management into damage control. According to The Australian, Luscombe's departure is expected to be unveiled when Woolies releases its results on February 25. Luscombe's term as CEO was scheduled to run five years and a move was apparently always on the cards. His five year tenure comes to an end in October and The Age reports that Luscombe had discussed a possible retirement after then. Perhaps that's what was behind his candid take on life after Woolworths. But for the time being there's an alarming lack of clarity from the retail giant. The Australian further speculates that more board changes are in the pipeline with long time directors Roderick Deane, Leon l'Huillier set to step down at the next AGM in November, and the ascension of Foran could trigger the departure of Woolworths finance chief Tom Pocket and Big W boss Julie Coates. This sort of speculation is probably the last thing Woolworths needs in the wake of a profit warning and as its rival Coles continues to land blows. All in all, the entire exercise has been an unnecessary PR disaster for the retailer.

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Deutsche Boerse, NYSE Euronext, London Stock Exchange, TMX, ASX, SGX

With the mooted merger between the local bourse operator, ASX Ltd, and the Singapore Exchange Limited (SGX) seemingly in political limbo, it looks like their global peers are keeping the consolidation ball rolling as they look to boost their markets and cut costs. Germany's Deutsche Boerse and NYSE Euronext have confirmed overnight that they were in advanced merger talks. The exchanges expect to combine their businesses in an all-stock transaction under a new legal entity incorporated in the Netherlands. If completed, the deal will see Deutsche Boerse shareholders will hope around of 60 per cent of the new entity with NYSE shareholders holding the rest. Together, Deutsche Boerse and NYSE Euronext would dominate exchange trading in continental Europe and the merger would cut costs by €300 million ($US408.7 million) a year. Meanwhile, the London Stock Exchange (LSE) has agreed to buy Canadian stock market operator TMX – the operator of the Toronto and Montreal stock exchanges – for four billion pounds. The all-share deal will see LSE shareholders own 55 per cent of the combined entity, which will be headquartered in London and Toronto and run by the LSE's chief executive, Xavier Rolet. The merged group will be world's largest bourse for trading in mining, energy and clean technology shares and the world's largest exchange by the number of companies traded. However, it's still only seventh in the world when it comes to market value. The combined entity is worth just a touch under $7 billion while a combined ASX-SGX is worth around $16 billion. Both mergers bolster the case for a tie-up between the ASX and the SGX given that standing alone is just not an option anymore in an environment where size means everything. Let's hope it's the sort of evidence that will convince detractors in Canberra. Incidentally, the LSE-TMX merger is expected to face some political scrutiny in Canada, with the provincial governments in Ontario and Quebec raising concerns.

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OZ Minerals, Independence Group, Jabiru metals

Back in the mining space, OZ Minerals has bounced back into black with a full year profit of $586.9 million and its loyal shareholders have been rewarded, with the miner to return $600 million to them.OZ Minerals has announced a capital management program, which includes a proposed capital return of 12 cents per share (almost $390 million dollars) and a share buyback of up to $200 million dollars. It has also proposed to undertake a 10 for 1 share consolidation. The largesse from a cashed up OZ Minerals mainly stems from the fact that it has been unable to find any significant acquisitions during the period. That's not to say there was an utter lack of viable targets. Sandfire Resources, in which OZ Minerals holds a 19 per cent stake, has been touted as likely prey and Citigroup analysts have also highlighted the possibility of a merger with fellow copper producer PanAust. On top of that, Rio Tinto's North Parkes mine and Rex Minerals' Hillside project are also seen as likely fits of OZ Minerals. The thing that worries some in the market is that OZ Minerals is a one-mine operation, albeit a very good one. The $1.2 billion Prominent Hill mine is a beauty but the miner may struggle to maintain output form there in the long-term and that means an acquisition would be handy. OZ Minerals boss Terry Burgess said yesterday that he wasn't under undue stress to make an acquisition and while the capital management is just rewards for its shareholders the miner still has close to $1 billion in the bank – so it still has the firepower if something appealing appears on the radar. Elsewhere, there's a base metals takeover in play with nickel producer Independence Group lobbing an off market $532 million bid for base metals producer Jabiru Metals. Independence has offered one of its shares for every eight Jabiru shares held, giving the bid an implied price of 96.1 cents per share, and the bid has the support of the target's board. The combined group would have a market capitalisation of about $1.5 billion and cash of about $271 million.

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Wrapping up

Rupert Murdoch's News Corporation has reportedly reached an agreement to buy UK production company Shine, with the London Standard saying that both parties have reached an "agreement in principle” on a 700 million deal. The transaction is going to make Shine's owner and Rupert Murdoch's daughter Elisabeth Murdoch a rich woman. Elisabeth is reportedly set to collect around 370 million ($A586 million) through the sale of the television production business responsible for Master Chef. Meanwhile, Centro Properties Group has narrowed down bidders for its $US9.5 billion US shopping mall assets with US private equity firm Blackstone Group reportedly in the running. Centro Properties Group has narrowed down bidders for its $US9.5 billion US shopping mall assets with US private equity firm Blackstone Group reportedly in the running. According to Reuters, the race is between Blackstone, a consortium of Morgan Stanley Real Estate, Starwood Capital Group and third consortium led by New York-based NRDC Equity, which includes Australian property heavyweight Lend Lease. Final bids for the 600 US properties were reportedly due in the third week of February. There's more talk from Nine Entertainment's management about the possible float of the media group with Nine's head of programming and production, Andrew Blackwell, joining boss David Gyngell in providing some detail. Blackwell has reportedly told industry magazine C21 that the $5 billion float is unlikely to happen in the first half of 2011. Blackwell added that CVC was working on the public offering which he now expects to be launched later this year. There's also some indication that CVC is likely to retain a stake of up to 30 per cent in Nine. In the banking sector, Commonwealth Bank of Australia expects to set up its first county branch in the Chinese province of Henan this month, in a bid to woo the small to medium-sized enterprise market and ANZ Banking Group has announced plans to integrate the management of its two brands in New Zealand. The overhaul will see the loss of 15 management roles and 25 back office positions.