Breakfast Deals: Santos seduction

Santos shares jump on foreign takeover rumours, while Hancock Prospecting is one step closer to securing funding for Roy Hill.

Today's deal talk centres on commodities hard and soft: Santos may have attracted a suitor, Hancock’s prospects are picking up, and ANZ is banking on an agriculture boom. Elsewhere, will Telstra cut the cord on its giant in-house super fund?


Santos has again found itself at the centre of takeover rumours after its share price jumped more than 8 per cent in the past week on heavier than normal volume.

Market talk suggests an offshore major like Chevron or ExxonMobil may be on the verge of launching a deal, according to The Australian.

It's not the first time we've heard rumours about a Santos buyout – they've crept up regularly ever since the company's 15 per cent shareholder cap was scrapped in 2007.

So why should we take the talk seriously this time around?

For one thing, Santos has formed a major alliance with BG Group in the Queensland gasfields. The interconnect deal, between Santos' Gladstone LNG project and BG's Queensland Curtis Island project, drastically reduces risks surrounding the giant project.

Santos is also pursuing a potential $120 million joint-venture with Drillsearch Energy to bring its wet gas assets to life in South Australia and expand production of its Cooper Basin oil reserve.

If talks are underway, expect these new developments to add value.

For now though, all parties are staying mum about the latest speculation.

Hancock Prospecting

Gina Rinehart's Hancock Prospecting is confident it will meet an end-of-year deadline to secure $7 billion in funding for its Roy Hill project, following positive meetings with key bankers.

In what is said to be the largest capital raising of its kind in mining history, Hancock and its Roy Hill partners are seeking $4 billion from export credit agencies and at least another $4 billion from commercial banks.

A number of those banks visited the facility in May and liked what they saw, Roy Hill spokesman Darryl Hockey told The Australian Financial Review.

“It is fair to say that there is a high level of interest in the project and the feedback continues to be positive,” Hockey says.

It's a huge fundraising task, especially as the iron ore price languishes and financiers lose interest in the cooling mining sector. It's notable that the process has already been delayed once.

National Australia Bank and BNP Paribas are said to be financial advisors on the project.

Noble Group, Western Resources

Also in the resources space, Singapore-based commodities trader Noble Group is said to be weighing a bid for iron ore miner Western Desert Resources.

WDR has revealed it is in talks with parties over a takeover, but it hasn't received a binding bid. For now, it won't name the potential suitors.

However, sources tell The Wall Street Journal Noble is among those interested in WDR.

The latest negotiations follow a $434 million approach by China's Meijin Energy Group last September, which fell apart without an explanation.

Iron ore prices are a little higher than they were then, but there's still not a lot of confidence about the sector. WDR may have to fight for favourable terms.

China National Agricultural Development Group, National Australia Bank

National Australia Bank has jumped on the food boom bandwagon, inking a deal with China's biggest agricultural group for exposure to expected investment inflows into Australia.

NAB, the nation's biggest business lender, has signed a memorandum of understanding with state-owned China National Agricultural Development Group Corporation, which has economic and trade ties with more than 80 countries and 15 billion yuan ($2.6 billion) in assets, according to The Australian.

The move comes as a string of high-profile businesspeople tout Australian farming as a replacement for the slowing mining sector.

On Thursday, Nufarm chairman Donald McGauchie suggested Australia was neglecting its farmers at a time when its proximity to Asia gave it a once-in-a-century opportunity to become a "food bowl for Asia's mega-middle class".

ANZ Banking Group and consultancy firm Port Jackson Partners also say Australia could capture up to $1.7 trillion in additional revenues from agricultural exports up to 2050, the Australian reports.

The newspaper says NAB hopes the agreement with CNADC will help its customers strike commercial arrangements outside Australia. In return, NAB will educate CNADC about banking and debt capital markets and provide financial services, including acquisition funding.

Wrapping Up

Telstra has hosed down speculation that it will spin off its $11 billion in-house superannuation scheme, Australia's biggest corporate fund.

At a board meeting in June, Telstra chief financial officer Andy Penn is understood to have told the trustees of Telstra Superannuation Fund the company had no intention of spinning off the retirement scheme, according to The Australian Financial Review.

“He was fairly categorical about that,” a source close to the board told the newspaper.

Meanwhile, the corporate regulator is monitoring InnoPac Holdings’ strange takeover bid for Melbourne company Merlin Diamonds, following revelations Joseph Gutnick swapped teams during the offer period, according to The Australian.

The newspaper says Gutnick, who chairs Merlin, paid $51 million for a 12 per cent slice of InnoPac after it launched the buyout. He also reportedly sold down his controlling stake in Merlin to less than 1 per cent.

In effect, he has gone from being takeover target to suitor.

It's unclear whether ASIC will move to stop the offer before it is due to close at 1900 AEST today.

Finally, Sydney property investors will be running the numbers on the city's iconic Jackson on George pub, which has been listed for sale by insolvency firm PPB Advisory.

The legendary drinking hole, placed into receivership in April, is expected to fetch more than $20 million, according to The Australian.

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