BREAKFAST DEALS: Spotless prowl

Spotless waits to see if a PEP rival will appear, while Noble gives encouragement to a Gloucester-Yancoal tie-up.

When Spotless Group announced a partial engagement with private equity suitor Pacific Equity Partners with a management presentation to shareholders, chairman Peter Smedley won praise across the board for his practicality and transparency. Now that the presentation is out in the open, directors will be watching to see whether it can successfully coax a predator into putting up more money, or convince shareholders that such a thing should be expected. Meanwhile, in Australia’s white-hot coal sector, reports are pointing towards a very quick agreement between Gloucester Coal and Yancoal Australia, and major shareholder Noble Group is ripe for a deal. In media, Nine Entertainment has a new chairman at an interesting time in the company’s history, to say the least, while Fairfax Media is said to be about to deal with an old friend. Finally, CSG Limited shares have been smashed after the company called off takeover talks, while Arrow Energy has finally hit the bullseye.

Spotless Group, Pacific Equity Partners

Spotless Group chairman Peter Smedley has met at least one of the challenges posed by the bid from Pacific Equity Partners, because he hasn’t dawdled. The integrated services company has released its management presentation to PEP to make the case that the improved $711 million indicative proposal from the private equity company should be a little higher. At $2.68 a share, PEP appears to be a bit short of the apparent internal Spotless target of $3 a share – although this figure has been disputed.

So what has Spotless come up with? The board expects earnings of between $140 million and $150 million annually by 2014 or 2015, after its transformation program has been completed. Meanwhile, Spotless also expected to book pre-tax earnings of up to $94 million this financial year, which is an improvement on last year’s result. The board is still short of recommending the proposal, indicating to shareholders that engagement with PEP may or may not result in a firm bid. The Spotless numbers for 2014/2015 look pretty good – the question is whether shareholders are willing to hold on for them with a possible European debt crisis catastrophe sitting between now and then.

Gloucester Coal, Yancoal Australia

Gloucester Coal and Yancoal Australia are reportedly moving at a rate of knots to get some sort of deal nutted out. It’s understood in a number of reports that Yancoal, a subsidiary of China’s Yanzhou Coal, has made contact with Gloucester’s largest shareholder, Noble Group. The Hong Kong investment house is arguably the player in this discussion, with 64.5 per cent of the target. By all reports, the Hong Kong group isn’t just open to a deal, but likely to give a compelling proposal the tick of approval. It’s believed that the deal will be worth $2 billion and understandably be conditional on due diligence, given the swiftness of the talks. Expect an announcement either today or tomorrow. Analysts are starting to believe that it’ll probably be a cash and scrip offer.

Nine Entertainment, CVC Asia Pacific, Fairfax Media

Former Nine Entertainment chairman Tim Parker has been a busy man. Given his executive chairmanship at Samsonite during an initial public offering on the Hong Kong Stock Exchange has been clashing with his duties at Nine Entertainment, which is currently struggling under a $3.7 billion debt burden, it’s perhaps unsurprising that the CVC Asia Pacific-associated executive is standing aside. His replacement is former McDonald's Australia chief executive Peter Bush.

Elsewhere in media, the word is that Fairfax Media in on the edge of retrieving about $20 million in property advertising revenue through a joint venture with former marketing director Antony Catalano. Catalano walked away from Fairfax in 2008 and pinched four of the company’s key property advertisers for his company MMP Holdings and its rival publication The Weekly Review. Now The Australian reports that Fairfax is on the brink of signing a joint venture with Catalano to bring those advertisers back into the fold in a deal that could be announced either today or tomorrow.

CSG Limited, NEC

The board of CSG Limited showed a certain degree of bravery by announcing to the market that talks with NEC have been called off because it wouldn’t result in a transaction "in the best interests of shareholders”. The information and communication technology company’s shares then plunged 40 per cent to finish trading at 60 cents. The Australian Financial Review understands that the Japanese multinational had finished due diligence and final presentations to management had taken place only recently.

Bow Energy, Arrow Energy

Bow Energy shareholders have overwhelmingly approved the takeover from Arrow Energy, jointly owned by Royal Dutch Shell and PetroChina. Over 95 per cent of shareholders approved the $535 million scheme of arrangement from Arrow that will finally secure the coal seam gas reserve company. Bow shareholders will receive $1.52 cash per share for their troubles, which is an improved offer from Arrow’s original $1.48 bid. It’s been an episode four months in the making that received a little scare when the consumer watchdog looked like it could be about to raise some concerns about east coast gas supply. But the Australian Competition and Consumer Commission eventually backed off and now it’s just up to the Federal Court to approve the scheme of arrangement, which is expected today.

Murchison Metals, Chameleon Mining, Mitsubishi

Murchison Metals looks set to tick off the final condition of its deal with Oakajee Port & Rail partner Mitsubishi by settling a legal dispute with Chameleon Mining. Mitsubishi will assume full ownership of the Western Australian port project once the battle has been settled. Encouragingly, Chameleon has been put in a trading halt while it considers an offer from Murchison. The company said trading is expected to resume before the beginning of the session on Friday, so don’t be surprised if an announcement drops sometime today.

Wrapping up

The Victorian government has handed out $1.6 billion in projects through its Regional Rail Link project and Leighton Holdings appears to be the big winner. Firstly, Leighton and Lend Lease have picked up a $505 million deal for works on tracks between Deer Park and West Werribee Junction with the joint venture of the their respective subsidiary companies Leighton Contractors and Baulderstone. Meanwhile, Leighton has also picked up some work on the Footscray to Deer Park section, a contract worth $835 million, through Thiess. Also sharing the load is its joint venture partner Balfour Beatty, as well as designers Parsons Brinckerhoff and Sinclair Knight Merz. And finally, Sydney-based UGL won the remaining $278 million contract for train control and systems through a consortium with Manidis Roberts.

And finally, it appears the market likes the idea of Macquarie Group selling some non-core assets, specifically the banking and financial services division. A report said yesterday that chatter was stirring within the silver donut itself that the units could be put on the block and that was enough to push up Macquarie shares almost 3 per cent, against a 2 per cent rise on the benchmark index.

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