BREAKFAST DEALS: Spare change for a Ten?

Speculation is mounting that Ten's billionaire board could take the network private, while Queensland Investment Corp is on the lookout for an exit.

With Ten Network raising capital from its billionaire shareholders and Seven Network’s billionaire owner buying share, theories are floating around that Australia’s TV industry could find itself in private hands post-haste. Queensland Investment Corp is said to be looking for exit options for Queensland Motorways. Meanwhile, gold sector consolidation continues, Virgin Australia has won approval from Singapore’s competition regulator but is still waiting for Australia’s, along with Woolworths, and GrainCorp’s suitor has copped a slap from Moody’s.

Ten Network, Seven West Media

The highly dilutive capital raising at Ten Network and the latest round of buying from Seven West Media billionaire Kerry Stokes has brought about speculation that both television networks could be joining rival Nine Entertainment in private ownership.

Ten is set to raise $225 million in fresh capital at 20 cents a share, having raised $200 million just six months ago.

To put this into perspective, Ten’s market cap is just $467 million with a share price of 32.5 cents. When it emerges from the trading halt, that share price will sink to somewhere around 20 cents, bringing the total decline for 2012 to 76 per cent.

Staggeringly, chairman Lachlan Murdoch couldn’t rule out another capital raising at yesterday’s meeting, which fellow billionaire major shareholder and director Gina Rinehart was 45 minutes late to.

Ten famously has a quartet of billionaire shareholders – Murdoch, Rinehart, gaming kingpin James Packer and WIN TV’s Bruce Gordon. The share price will be down 87 per cent when it emerges from a trading half compared to when the first three started buying in.

Ten deputy chairman Brian Long told undoubtedly frustrated shareholders yesterday that a privatisation by the big shareholders had never been discussed. If it had, Ten probably would have told the market, which would have to put a floor under the broadcaster’s share price.

As of early this morning, a privatisation play by all the big shareholders would appear somewhat unlikely given that Rinehart still hadn’t decided whether she would participate in the raising.

Unlike the raising in June, shareholder rights are non-renounceable, which means they can’t be onsold. If you don’t participate in the raising, you’re diluted without reimbursement.

If Rinehart doesn’t participate, not only will it be disappointing to other shareholders, it’ll be a pretty clear signal that if there is any as-yet undeclared appetite to take the company private amongst the directors, she’s not likely to feature in such a push.

It should be said that Ten going private is hardly a new theory. The company has been on the private equity takeover target list for most of the year.

It’s also a natural reaction when valuations are beaten down in any industry. Media billionaire Stokes has been routinely cast as a possible bidder to take Seven West Media private; in fact it pops up every time he buys shares.

Stokes’s Seven Group Holdings increased its stake in Seven West to 35.22 per cent from 33.16 per cent.

The company’s share price is down 51.2 per cent this year, having been smashed in April following a shock profit downgrade. This makes the stock cheaper for Stokes to pick up.

Queensland Investment Corp, Queensland Motorways

Queensland Investment Corporation has reportedly sent out an invite to investment for proposals to sell its 67 per cent stake in Queensland Motorways, underlining an interesting patch for road projects in the sunshine state.

According to the Deal Journal Australia, it's tipped to pick an advisor before the end of this year, according to sources.

QIC took over the asset, which controls the Gateway and Logan motorways tolling businesses, in 2010 for $3 billion.

Infrastructure assets are getting attention from international investors generally, but Australian assets are considered especially attractive given the country’s relative economic strength.

QIC also owns 8.3 per cent of Brisconnections, which is currently in a trading suspension thanks to poor traffic numbers not mixing well with the company’s $3 billion debt burden.

Macquarie Infrastructure and Deutsche Bank own almost 80 per cent of Brisconnections.

PMI Gold, Keegan Resources

An ASX- and Toronto-listed gold miner has reminded investors going into 2013 that the precious metal is the focus of M&A activity in a beaten down resources industry.

PMI Gold has agreed to a $700 million merger with Canada’s Keegan Resources, an announcement that sent the company’s share price up 7 per cent in yesterday’s session. PMI shareholders are set to receive 0.21 Ashanko shares for each stock they hold.

The new company, which will roughly reflect a 50:50 ownership, will be called Ashanko Gold, reflecting their respective focus on the African region of West Ghana.

"We think the combination of these two companies with adjacent and complementary deposits, highly prospective exploration holdings on the Asankrangwa belt, outstanding self-funding financial flexibility and a combined management strength will allow both groups of shareholders to realise maximum value through Asanko Gold's path to production and aggressive growth profile through to mid-tier producer status by 2017,” said PMI chief executive Collin Ellison.

The gold sector has kept the M&A industry ticking along slowly at a time when other commodities have gone quiet. Salt Lake Resources took out Integra Mining in August for $426 million, which was followed by Endeavour Mining’s scrip deal for Avion Gold.

The biggest fish is of course AngloGold Ashanti. Earlier this year the company’s boss Mark Cutifani hinted of a possible spinoff of its Australian business on the ASX.

That’s a prospect for next year, but the anticipation is significant. Launching such a vehicle in Australia would give shareholders a wide avenue to gold that bypasses Newscrest Mining, which took out main domestic rival Lihir Gold in 2010.

Virgin Australia, Skywest Airlines

Virgin Australia has won the approval of the Singaporean competition regulator to take-over Skywest Airlines with a roughly $100 million cash-and-scrip deal.

Skywest, which largely services Western Australia, is incorporated in Singapore along with Singapore Airlines, the owner of budget-carrier Tiger Airways that Virgin is gunning for a 60 per cent stake in.

Both these deals are currently before the Australian Competition and Consumer Commission, which is also considering the proposal from Qantas Airways to form a 10-year alliance with Middle Eastern carrier.

Chairman Rod Sims is expected to release the a draft determination on the Qantas deal sometime this month, with the Virgin decisions to follow in January.

Whatever the outcome, it’s clear that the shape of Australia’s aviation industry will be shaped to an extraordinary extent by our consumer watchdog over the next two months.

Woolworths

Both Qantas and Virgin will be hoping to receive a more favourable decision from the consumer watchdog than the one seemingly destined for Australia’s largest supermarket in the nation’s capital.

The Australian Competition and Consumer Commission released a statement of issues yesterday detailing its concerns over Woolworths’s proposed acquisition of the Hawker Supa IGA in the Canberra suburb of Belconnen.

The regulator said its preliminary view is that the proposed deal could result in a "substantial lessening of competition” in the area.

Stakeholders have until January 13 to make submissions to the ACCC.

It comes on the back of the regulator’s rejection of an attempt by Woolworths to pick up three hardware stores in rural Victoria, which is clearly important given the decision by Woolies to take on Wesfarmers powerhouse Bunnings.

The Australian Financial Review reports that fund managers have discovered in a meeting with Woolworths finance director Tom Pockett that the retail giant’s joint venture partner in the Masters home improvement business, US behemoth Lowe’s, might sell out of its 33 per cent stake in October or November next year.

The report indicates that there’s no sign that Lowe’s will go down that road. But the American leader does have a put option on its stake that could be activated late next year. In that scenario, Woolies would pick up the stake.

GrainCorp, Archer Daniels Midland

Rating agency Moody’s Investors Service has cut its credit rating outlook for Archer Daniels Midland to negative because increased "event risk” relating to its improved $2.8 billion takeover offer for GrainCorp.

"Any acquisition of GCL without the approval of its board is likely to be a lengthy process due to Australian regulations,” Moody’s said in a statement. Moody’s is particularly concerned about the prospect of a debt-funded acquisition.

ADM hasn’t actually said that it’ll fund the deal with debt and it should be said the company is large enough, and GrainCorp is strategically attractive enough, to command a loan from many sources, regardless of what Moody’s says.

But the ratings agency is nonetheless convinced that ADM’s "credit metrics are already stressed by unusually high crop prices and low volumes due to the US drought, a debt-financed acquisition of this size would be a significant credit negative and likely result in a downgrade of the rating.”

Wrapping up

Sirius Resources, the one that exploded in July from less than a cent per share to more than $2 a few months later, is in a trading halt ahead of a capital raising.

The company is expected to put the funds towards a feasibility study for production of its large nickel-copper discover in Western Australia.

The Australian Financial Review tips Sirius to tap the market for $40 million.

And finally, Leighton Holdings subsidiary John Holland has picked up the contract for stage two construction of Perth’s new children’s hospital. Construction of the first stage of the $1.2 billion project has been completed.

The next stage, worth $851 million, brings the total value of the company’s Australian healthcare projects close to $2 billion.