BREAKFAST DEALS: Social investment

Banks join state government to offer bonds to fund social programs, while Gloucester Coal chiefs head to Hong Kong to seal the deal.

It’s all well and good to suggest that National Australia Bank should offload its UK assets – such tones have certainly been seen in this column – but they need a buyer. So it might be somewhat disappointing to hear of leadership questions at the top of one of the most likely bidders for Clydesdale Bank. Meanwhile, Gunns is still in a trading suspension as the search for that elusive equity investor continues. Elsewhere, Gloucester Coal executives head to Hong Kong as global investors massage their holdings in the company, Ten Network has let us in on the potential sale of its outdoor advertising arm, and there’s possibly bad and good news coming out of the NSW government.

NSW electricity privatisation

NSW Premier Barry O’Farrell has thrown a spanner into the works by announcing that three state electricity distribution assets – the poles and wires – will be merged together to establish cost savings before they’re sold off. The three companies are Ausgrid, Endeavour Energy and Essential Energy.

One wonders if a clever investment banker has put forward such a proposal and swayed the government into thinking it can do this as efficiently as a private player could. Why not set the conditions for a merger and insert that into the sale process so an outsider with some experience with this kind of thing – who could no doubt do it quicker – can bid for all three?

Commonwealth Bank of Australia, Westpac Banking Corp

In more encouraging news from NSW, Commonwealth Bank of Australia and Westpac Banking Corp are set to develop social-bonds for the state government, inspired by a similar move in the UK. The Australian Financial Review says NSW Treasurer Mike Baird will announce today that three groups have been piked to create these pilot bonds, with the aim of reducing foster care and stopping young criminals from reoffending.

These bonds will be modelled on the UK system where investors get a return if the community programs that their funds go into produce positive social change and savings for government.

National Australia Bank, Clydesdale Bank, Yorkshire Bank

National Australia Bank chief executive Cameron Clyne has made it clear the lender’s UK operations, Clydesdale Bank and Yorkshire Bank, are only up for review and a sales process isn’t a certainty. That might be just as well given the jitters that have emerged in one of the most likely suitors. London’s Telegraph reports that chief executive of NBNK, which is thought to be having a look at Clydesdale, Gary Hoffman has held discussions with London-based financial services interest the Co-operative Group.

Gunns

As expected, Gunns has kept its shares in suspension – this time until at least March 26 – while it continues to look for a new investor in the wake of collapsed talks with New Zealand billionaire Richard Chandler. Gunns has conceded that environmental concerns could have played a big factor in the failure of discussions with Chandler, saying that it was of the company’s understanding that the investment didn’t meet their "social criteria”. Gunns did not elaborate on the point, nor did it acknowledge the widespread speculation that the timber company’s investors were concerned about the dilutive nature of the proposal.

Whatever the case, Gunns has got the first stage of its Green Triangle forest estate sale away with the second still waiting approval from the Foreign Investment Review Board, though it’s understood a green light is pending. The question is whether it can snare a new investor. Given that Chandler pulled out at least in part for environmental reasons, wouldn’t the new investor be under pressure to explain why it doesn’t share those concerns?

Gloucester Coal, Yancoal Australia

Gloucester Coal executives have just wrapped up their week in New York selling the company’s proposed merger with Yancoal Australia, owned by China’s Yanzhou Coal, to establish a formidable $8 billion coal company. While they settle in Hong Kong to perform the same task to Asian-based investors, news back home speaks of shifting emphasis on the register back home.

The Australian Financial Review believes that one fund in New York and another in Hong Kong have put together positions approaching 5 per cent and a substantial shareholder notice should clear things up in coming days.

Ten Network, Eye Corp

Ten Network has informed the market on something it’s been aware of since earlier this month, that it’s outdoor advertising unit, Eye Corp, could be on the way out. Ten confirmed the strategic review of the unit, adding that it hasn’t made up its mind whether to get rid of Eye just yet. It’s thought the business would generate something in the order of $135 million.

Ten would be putting Eye on the market in a period of increased activity. CHAMp Private Equity picked up oOh!media late last month, while APN News and Media is looking for a private equity partner to increase its footprint in this space.

Wrapping up

It turns out that Insurance Australia Group will be the next to opt for the hybrid issue. The local insurer is looking at a $350 million raising at $100 a pop.

Lynas Corp says it’s of the understanding that the committee set up by the Malaysian government over its controversial rare earths processing plant is about raising awareness, rather than seriously threatening the company’s hard-won temporary operation approval for the site. Meanwhile, Australian shipbuilding company Austal has picked up contracts worth $US691 million ($653 million) to construct two more combat vessels for the US Navy. This stems from the company’s 2010 contract with the seagoers and could potentially cover 10 vessels worth up to $US3.5 billion.

And finally, the aftershocks of the failed takeover attempt at PaperlinX are continuing, with the embattled directors releasing a statement in support of chairman Harry Boon and condemning the actions of shareholder and would-be Boon replacement, Andrew Price, as amounting to a threat to the company.

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