BREAKFAST DEALS: Stoking Seven's fire

While the $5 billion float of Nine Entertainment has been getting all the attention it looks like wheels are in motion at media and earthmoving baron Kerry Stokes's Seven Media Group. Consolidation is the name of the game when it comes to super funds with AustralianSuper and Westscheme joining forces and there are fears of a further shake in the ranks at Asciano as the market speculates on Mark Rowsthorn's next move. Elsewhere, Asahi rules itself out as a suitor for Foster's for now, JP Morgan finally loses its long running fee battle with Consolidated Minerals and Telstra and Foxtel unveil their T-Box deal.

Seven Media Group, Kohlberg Kravis Robert

The market may be keeping an eye on when Nine Entertainment's private equity owner CVC Asia Pacific finally hits go on a $5 billion float of the media company, however, it looks like talks of a similar move at Kerry Stokes' Seven Media Group (Seven Media) are gathering steam. There is speculation that Stoke's private equity partner in Seven, Kohlberg Kravis Roberts (KKR) may be looking for an exit. While Seven has dismissed the chatter KKR's recent move, in conjunction with Permira, to offload a controlling stake in German satellite broadcaster ProSiebenSat1 for $252.6 million has added extra fuel to the rumours. According to The Australian Financial Review, advisors who have worked with Seven and KKR in recent times have been retained to work on the sale of KKR's 45 per cent stake in Seven Media. It adds that Seven's advisers are working on a plan to merge Seven Media with Stoke's other media interests, including Prime Media Group, West Australian Newspapers  and Consolidated Media. KKR and Seven have reportedly held talks about the structure of the group – which includes the Seven Network, Pacific Magazines and Yahoo7 – and The Australian reports that KKR, which paid $735 million for the stake in 2006, is pushing for a float. Stokes is apparently not to keen on a float but if he and Seven chief executive Peter Gammell are serious about putting all of Stokes' media interests under one umbrella, then KKR's exit provides the perfect opening. However, selling the 45 per cent stake may not be straightforward for KKR, given that its joint-venture agreement with Seven Group Holdings may prevent it from making the sale at a price not favoured by Stokes and Gammell. A lot will also depend on just how the conducive the market is to media floats. CVC Asia Pacific still seems to have its doubts and it's unlikely that KKR would opt to dive in before its private equity peer.

AustralianSuper, Westscheme

Moving to the superannuation sector, Australia's largest industry super fund, AustralianSuper, has joined forces with WA-based fund Westscheme to further beef up its credentials as the biggest industry superfund in the country. The merger will bring AustralianSuper's total membership to more than 1.7 million, with over $40 billion in funds under management. The merger will take effect on June 30 and is another example of the consolidation sweeping through the industry after the Cooper Review made its case to simplify administration and increase services. The AustralianSuper-Westscheme merger follows the merger last year between NSW public sector superannuation fund First State Super and Victoria's Health Super, to create one of the five largest super funds in Australia, with more than $27 billion under management and around 750,000 members. AustralianSuper was pretty much the top dog when it comes to industry funds but the Westscheme deal does help it extend its lead on UniSuper, which manages around $26 billion. In other superannuation news, the chairman of West Australia's biggest superannuation fund, GESB, Phil Harvey, is set to retire next month. Harvey was running the show at the $11 billion GESB for eight years and The Age reports that he is most likely to be replaced by John Langoulant, who incidentally has worked for Kerry Stokes' Australian Capital Equity.  

Asciano Group, QR National

There are fears that the abrupt departure of Asciano Group boss Mark Rowsthorn could lead to a further shake up in the ranks of the rail and ports operator. Rowsthorn was unexpectedly dumped this week by Asciano's board in favour of former DHL boss John Mullen, and the Australian Financial Review reports that the company could now undertake a broader executive revamp. While Asciano chairman Malcolm Broomhead didn't hint at any imminent changes there is a feeling that some in the company who have worked closely with Rowsthorn in the last four years could decide to leave or may be shown the door. There's also talk that Asciano's recently appointed chief financial officer Angus Mackay was a little miffed at having been overlooked as Rowsthorn' successor. Mullen is expected to spend the rest of this week meeting Asciano staff and a clearer picture will probably emerge once he starts the job next week. Meanwhile,  Rowsthorn's immediate future may be up in the air that hasn't stopped analysts from speculating, with some saying that he may use his personal fortune to form a consortium and lob a bid for Asciano's port business, and others speculating that he could be a likely candidate to fill the shoes of QR National's boss Lance Hockridge. Speaking of QR National, the coal hauler has received a thumbs down from Citigroup analysts. It's been a remarkable start to 2011 for the nation's two major coal haulers, one has just seen the sudden departure of its CEO, while the other is still counting the costs of the wild weather in Queensland. Taking that into account, Citigroup analysts reckon there's only one worth keeping. That winner is Asciano, which has clearly shown an ability to win market share in Queensland and defend its home turf in NSW. Citi forecasts Asciano to increase its share of the national coal haulage market from 39 per cent to 53 per cent in the next decade as it penetrates further into the Queensland market. With regards to QR National, Citi analysts say that a lot of the earnings upside for the coal hauler is subject to how effectively it closes the gap in operating margins with its industry peers and mange its costs. Citi has target price of $2.05 on Asciano and rates it a "buy”, while QR National gets a target price of $2.65 and is rated a "sell”.

JP Morgan, Consolidated Minerals

JP Morgan has suffered a fatal blow in its tussle with Ukrainian billionaire Gennadiy Bogolyubov after the NSW Court of Appeal shot down the investment bank's appeal to recover lost fees. JP Morgan was chasing Consolidated Minerals (ConsMin) and Bogolyubov for $86.9 million for advice provided during an 18-month, three-way takeover bidding war for ConsMin. Bogolyubov's Palmary Enterprises eventually beat off Brian Gillbertson-led Pallinghurst Resources and Territory Resources to ConsMin in 2007 with a $1.36 billion bid. The trouble with JP Morgan began when JP Morgan billed ConsMin $36 million in incentive fees, a $10 million base fee, $100,000 in expenses and a base defence response fee. That fee was calculated as a percentage of the transaction value. ConsMin, which has disputed the base defence response fee and the incentive fee, paid JP Morgan $20 million in 2008 and it looks like that is where things are going to stay.  

Telstra, Foxtel

Telstra has finally revealed its pay TV deal with Foxtel, with the telco to beam the pay TV operator's content through its T-Box digital video recorder. The deal is big win for Foxtel and its boss Kim Williams who said that it opens up new customer segments for the company. The deal was reportedly more than six months in the making and will allow T-Box users to subscribe to 30 Foxtel channels delivered via a BigPond broadband connection from May this year. Telstra will also add a video on demand service from Foxtel. The pricing of the 30 channels and the video on demand will be set by Telstra and will be announced in May. The telco did not disclose the price it's paying for the channels.

Wrapping up

Japan's Asahi Breweries has reportedly ruled itself out as a potential bidder for Foster's Group's beer business for now. According to Reuters, Asahi president Naoki Izumiya told the press that the unit was a tad too expensive and the Australian market was looking challenging. Asahi has its eyes on expansion into China and Korea and while Izumiya has played down talk of push into Australia that stance could change in a hurry. Meanwhile, takeover target Austereo has opened a shareholder information line in relation to the $741 million bid lobbed by Southern Cross Media. Austereo shareholders who have questions about the takeover offer can call the line. Elsewhere, Brambles has bought the US based bulk and automotive container business Container and Pooling Solutions (CAPS) for $US16.4 million. International engineering and project management company AMEC has entered into an agreement to acquire Zektingroup (Zektin). Melbourne-based Zektin is a 200-person engineering consultancy that provides front-end engineering design (FEED) and engineering services to the oil and gas market, in particular coal seam methane (CSM). In resources news, Drillsearch has confirmed that it has not lobbed any takeover offer for Innamincka Petroleum. Innamincka told the market in January that it had received an incomplete proposal from Drillsearch. Meanwhile, Melbourne-based Fortis Mining has secured a $10 million equity investment from global investment fund, Global Emerging Markets(GEM). GEM is a UK-based $3.4 billion alternative investment group that manages a diverse set of investment vehicles focused on emerging markets across the world. Elsewhere, Jatoil Limited has moved to acquire four coal exploration permits and permit applications in the Galilee Basin in central Queensland. Jatoil is also in talks to acquire two coal assets in Indonesia. In international news, billionaire investor Wilbur Ross's International Coal Group is preparing for a sale. According to dealReporter, potential suitors have not yet started conducting due diligence on the company. Finally, Royal Dutch Shell has reportedly offered Russian oil giant Gazprom assets in Asia in exchange for a deal to expand Russia's only liquefied gas export plant. According to Bloomberg, the offer is part of talks on a wider global alliance.