BREAKFAST DEALS: Rio's rival reckoning
Rio Tinto, Riversdale Mining, ICVL
Rio Tinto will have to wait a few more days before finding out if it is facing a counter bid for its $3.9 billion offer for Riversdale Mining with possible Indian suitor International Coal Ventures (ICVL) – a consortium of five Indian public sector companies – now expected to make its position clear sometime this week. ICVL's board has reportedly deferred its decision on a possible rival bid after seeking more information from its advisor Citigroup on valuation. Another meeting is now scheduled for this Thursday but one wonders if the Indians are getting cold feet about locking horns with Rio. ICVL a joint venture between Coal India, Steel Authority of India, iron ore miner NMDC, power company NTPC and steel company RINL is sitting on close to $US10 billion of cash reserves so money is not a problem. However, there are question marks about whether the consortium formed in May 2009 is sufficiently motivated to overcome its bureaucratic nature with the companies willing to put their individual agendas behind them and present a united front. While the need to source quality coal assets is not lost on Indian companies the M&A track record of Indian public sector companies is pretty patchy, with many expressing their interest in assets only to bow out of the race in the last minute. The market will no doubt be keen to see if they are serious this time around. The news of the extension comes as Rio Tinto crossed a key regulatory hurdle in its bid for Riversdale with the Foreign Investment Review Board (FIRB) giving the transaction its nod, clearing the way for the takeover deal to proceed. Rio's offer is scheduled to close on February 18 but there is a good chance that that deadline will be extended. Elsewhere, there is talk that Rio may be casting an eye further afield for potential targets. According to The Australian Financial Review, Rio boss Tom Albanese's recent comments about getting a piece of the action at the Pebble copper-gold project in Alaska has sparked speculation that the miner may be keen on $C1.7 billion Canadian miner Northern Dynasty Minerals. Rio already holds a 19.8 per cent stake in Northern Dynasty. Pebble is the world's fifth largest porphyry copper-gold deposit.
Tata Steel
Meanwhile, Riversdale's major shareholder Tata Steel has given no further indication on what it intends to do with regards to Rio Tinto's offer, presumably too busy getting its public offering up and running. The Indian steelmaker has evidently had some good luck on that front with reports that it has raised $US770 million from a share sale after pricing the issue at the top end of its indicative range of between $US11 to $US14. According to Reuters, Tata Steel's issue of 57 million shares was covered more than six times and the equity raising comes a week after the steelmaker raised $US112 million from 33 anchor investors that included the Abu Dhabi Investment Authority, the Government of Singapore, and investment arms of Fidelity, Morgan Stanley and Credit Suisse.
BC Iron, Regent Pacific
BC Iron's (BCI) managing director Mike Young is held in pretty high regard by the shareholders of the Pilbara-based iron ore junior and it's well justified given that in four years the Canadian has taken BCI from just another iron ore hopeful – with no production or infrastructure access – to a $345 million takeover target. However, his decision to resoundingly back the $3.30 a share cash bid from its Hong Kong stock exchange-listed shareholder Regent Pacific Group has left some shareholders stunned. Regent's offer, with its skinny 4 per cent premium to BC Iron's pre-trading halt price of $3.17 may have left some disappointed but in reality the miner's share price has risen more than 50 per cent in the last three months and $3.30 a share in cash doesn't look so bad considering BC was hovering around the $2 mark in October last year. Those expecting BC's joint venture partner at the Nullagine project, Fortescue Metals Group, to launch a rival bid may also be in a for a disappointment with many analysts ruling out the possibility. However, there is a twist to the tale with BC's largest shareholder Consolidated Minerals (ConsMin) yet to have its say on the issue. ConsMin's chief operating officer Glenn Baldwin sits on BC Iron's board and while Regent's bid has won unanimous support from the target's board it turns out that Baldwin has supported the proposal only in his capacity as a non-executive director of BCI and not as a representative of ConsMin. So we will have to wait and see if ConsMin – owned by Ukrainian billionaire Gennadiy Bogolyubov – is willing to cash out its 21 per cent stake and run or whether the entire Regent Pacific exercise was just an exercise by BCI to flush out a higher bid from ConsMin.
Village Roadshow, Austereo, Ten Network Holdings
Media company Village Roadshow's move to offload its entire 52.5 per cent stake in Australia's biggest radio group Austereo may not be as simple as it looks given that the stake potentially worth over $500 million dollars may be a bit too rich for prospective suitors. Private equity firms and media companies looking to diversify their assets are being touted as potential suitors but the sale of the stake essentially puts all of Austereo at play at an indicative bid range of around $2.25 to $2.80 and some analysts reckon finding a suitor game enough for a full takeover at a hefty premium to Austereo's pre-announcement trading of $1.80 may be harder said than done. While private equity players like Archer Capital, Blackstone and Ironbridge Capital mare seen as the ones most likely to have a fling a lot of the focus will be on the TV networks. Nine Entertainment and Seven Network Holdings have reportedly already ruled themselves out of contention leaving Ten Network Holdings as the likely suitor. However, there is a catch as a potential deal could cause trouble for Ten's shareholder and board member Lachlan Murdoch. Murdoch owns half of another local radio heavyweight DMG through his private company Illyria and that means a tilt at Austereo by Ten could see him relinquish his seat at the TV network. Keeping that complication in mind it is more than likely that Village Roadshow may just opt to sell its stake in chunks or decide to stay put. Village has hired UBS as its advisor as talks continue.
Wrapping up
With local brewery giant Foster's Group edging closer to the planned demerger of its beer and wine businesses there is fresh talk that global beer giant SAB Miller may be preparing for an imminent assault. According to The Sydney Morning Herald, SABMiller has moved to sort out any legal and commercial problems arising from its existing Pacific Beverages joint venture with Coca Cola Amatil to clear the way for a bid on Foster's. With that in mind the big question for the market will be whether the move comes before or after the demerger and let's not forget there are a number of Asian suitors – Asahi, Bright Foods – out there who presumably will provide SABMiller stiff competition. Elsewhere, ACCC boss Graeme Samuel's DFO dirty laundry continues to pile up with news that the competition watchdog's chief is now embroiled in a court battle with the founders of the discount retail chain which ran into trouble in August last year. According to The Australian, Samuel is facing more heartache from his blind investment in DFO with the retail chain's founders David Goldberger and David Wieland now alleging that Samuel provided a letter indemnifying the founders. That means that Samuel is liable for one third of losses they sustained. In the energy sector, Amadeus Energy went into a trading halt on Friday and it looks like the process to unlock the value of its underlying assets which started in June last year, has finally flushed out a serious bidder for the US-focused oil and gas producer. Amadeus said the offer, from an unnamed bidder, was "an unsolicited, conditional proposal that may result in an offer being made for all the shares in the company". Amadeus and its adviser Macquarie Capital Advisers are now currently locked in discussions with the unnamed party. Amadeus is capitalised at around $66 million and its stock last traded at around 22 cents. In overseas news, Facebook has sealed an oversubscribed $US1.5 billion round of financing led by Goldman Sachs setting the stage for what could be the one of the largest and eagerly anticipated initial public offerings for some time. According to Reuters, Facebook raised the funds of which a $US1 billion came from Goldman Sachs' overseas clients and remaining $US500 million coming from Goldman itself and Russian investment firm Digital Sky Technologies. The transaction gives Facebook a projected value of $US50 billion. In other news, Industrial and Commercial Bank of China has agreed to acquire a majority stake in the Bank of East Asia's US unit, according to the Wall Street Journal. The move makes it the first Chinese lender to buy into a US retail bank.
Call 1300 880 160
Start a chat
Schedule a call
