BREAKFAST DEALS: Rio's new river

Rio Tinto may have its sights on Riversdale Mining in a bid to beef up exposure to coking coal, but the target's complex shareholder registry should make things interesting. Meanwhile, a bumper year for the infrastructure sector could be capped off with one more heavyweight deal with Australia's largest port operator on the block. Elsewhere, Google joins Yahoo is failing to get its hands on the hottest  private company on the internet, Groupon, Macquarie scales down operations in the Middle East and JP Morgan is revealed as the mystery copper buyer on the London Metal Exchange.

Rio Tinto, Riversdale Mining

Rio Tinto is in the mood for acquisitions and it hasn't taken long for a likely target to emerge with reports that the mining giant may have its heart set on up and coming coking coal miner Riversdale Mining. According to UK's Sunday Telegraph, Rio is preparing a $US3.1 billion bid for Riversdale at $15 a share. Rio Tinto used its investor briefing last week to flag its return to the M&A market and with local iron ore buys apparently out of the picture it looks like coking coal may be the miner's commodity of choice. Rio Tinto's portfolio is a little short on coking coal compared to its rival BHP Billiton and Mozambique-focused Riversdale, which holds around 13 billion tonnes of high quality coking coal, is certainly a good way of remedying that situation. While it's still too early to say if a deal between the two companies would be completed the fact that Riversdale has emerged as the likely target won't be too much of a surprise for the market. Riversdale has been touted as a top target since September as M&A activity in the coal sector heats up thanks to its large resource base and its strong presence in a rapidly emerging coking coal region. However, sealing a deal with Riversdale may be a little easier said than done given the miner's complicated share register and the fact that at $15 a share Rio's offer may not be an instant winner with Riversdale's shareholders. Riversdale's major shareholders include India's Tata Steel, Brazilian steelmaker CSN and US investment firm Passport Capital. These three parties together hold over a 50 per cent stake in Riversdale and while there is talk that Passport Capital may be willing to sell its stake to a suitor it will be interesting to see where the other two stand. Peabody Energy's failed $4 billion bid for Macarthur Coal earlier this year showed just how much of a say major shareholders can have in scuttling potential deals and Rio will have to contend with this issue if and when it officially lobs its offer. The other thing to keep in mind is that any offer from Rio is unlikely to go unchallenged and a bidding war for Riversdale with the likes of Vale, Peabody and a host of Chinese and Indian players could well be on the cards. UBS is reportedly advising Riversdale on the deal while Macquarie is doing the honours for Rio Tinto.

DP World, Citi Infrastructure Investments

It looks like the busy year for the local infrastructure sector could well be capped off with another heavyweight deal with Australia's largest port operator, DP World (Australia) Holdings, reportedly on the block. DP World Australia, formerly known as P&O, is owned by the debt laden emirate of Dubai and speculation of a sale came to light last week when the emirate flagged it was looking to offload some of its top assets, as it moved to review some of its investments. The talk so far has revolved around DP World renewing confidential plans to spin out the Australian ports business, with Deutsche Bank and JPMorgan eyeing a dual track sale process in the first half of next year. Now, The Australian Financial Review reports that US-based Citi Infrastructure Investors, run by an Australian Felicity Gates, is circling the port operator and hoping to clinch a $1.5 billion deal before Christmas. That may be a stretch given that a formal announcement will no doubt attract interested private equity operators and Sydney-based Qube Logistics, backed by Chris Corrigan and Sam Kaplan, which has also been touted as a possible suitor. Deutsche Bank is advising DP World while UBS is working with Citi Infrastructure, the AFR said. Meanwhile, with Queensland hogging much of the limelight with the privatisation of its infrastructure assets investment bankers are now turning their attention to what Victoria and New South Wales could potentially do in the coming year. The Bligh government recently sold the Port of Brisbane for $2.3 billion and The Australian suggests that the NSW and Victorian governments could raise more than $4 billion if they choose to privatise their metropolitan container ports – Sydney Ports Corporation (SPC), Port of Melbourne Corporation (PMC). It is interesting that talks of a potential sale have apparently come to light after the election of a Coalition government in Victoria and the expected trouncing of the Labor government in NSW. According to The Australian, SPC could fetch more than $2.1 billion and PMC could be sold for about $2.4 billion.

Macquarie Group

Macquarie Group may be running full steam in the US but there are signs that the investment banking giant may be having a tougher time in the Middle East. According to Dow Jones News Wires, the bank has been scaling down its operations in the Persian Gulf after failing to generate enough business. Macquarie has reportedly halved its staff in the region to about 50 bankers over the past two years as it looks to build growth in US and Europe. The US has been a particular area of interest for Macquarie which last week appointed former Bear Stearns banker Thomas Hassen chairman of global oil and gas banking at Macquarie Capital and has also snapped up investment bank Fox-Pitt Kelton, energy advisory Tristone Capital and Constellation Energy in the last couple of years. To be fair to Macquarie, it isn't the only one shedding staff in the Middle East especially given the precipitous fall in the fortunes of former hot spots like Dubai since the global financial.

Google, Groupon

Google is still waiting to seal its biggest acquisition to date after its multi-billion dollar offer to buy online coupon service Groupon failed to deliver what many have called the "hottest private company on the internet” to the lap of the internet giant. Google had lobbed a $US6 billion offer for Groupon but the Wall Street Journal reports that talks between the parties have ended. While the reasons for the collapse are currently undisclosed the paper suggests that the Chicago-based social buying site may have spurned Google's offer because it plans to remain independent and possibly launch an IPO. Google's massive bid did give its shareholders a few flutters in recent weeks but the deal would have given Google a dominant position in the local online commerce market and opened the tap to more social-advertising dollar given that Groupon's subscriber base is expected to grow to 25 million in 2011 from 13 million this year. Groupon does not disclose financial figures but the Wall Street Journal reckons the company' actual run rate for this year is clocking in at $US2 billion in revenue. That's a whole sight more than the $US500 million to $600 million touted by analysts and with those kind of figures its small wonder everybody wants a piece of Groupon. Yahoo failed earlier this year with its $US3.1 billion bid and now Google has also joined the club.

Wrapping up

Wall Street heavyweight JP Morgan has been revealed as the mystery buyer snapping up a whole lot of copper in the London Metal Exchange (LME) in recent weeks. The activity was reported last week by the Wall Street Journal which said that a single (unidentified) trader holds, or recently held, more than 50 per cent of LME copper stockpiles just as the premium for spot over three-month delivery metal jumped to the highest level in more than two years. According to UK's Daily Telegraph, JP Morgan had grabbed more than half of that copper on the LME, with a $US1.5 billion trade putting a squeeze on the copper market and sending the price for the immediate delivery of copper to $US8,700 — its highest levels since the global financial crisis. Meanwhile, Origin boss Grant King has told ABC TV that the company could launch an equity issue if it's successful in its bid to buy power assets from the NSW government. Separately, AMP chief executive Craig Dunn has told the ABC that a merged AMP and AXA Asia Pacific Holdings (AXA APH) will focus on wealth management rather that banking. Finally, QR National is set to start trading on the Australian Securities Exchange under normal conditions for the first time this week. The coal hauler has been trading with a "greenshoe" option in place since listing two weeks ago, allowing the Bligh government to buy shares to support the stock price if required. The stock, which listed at $2.54 a share, closed at $2.69 a share on Friday.