BREAKFAST DEALS: Surf's down

The owners of Rip Curl won't be catching a wave for some time, with a sale process reportedly over. Does this mean anything for Billabong International? Meanwhile, Australand Property Group has fired the starting gun for a deal to be made; two senior public officials have made important M&A utterances for things to come; shipbuilder Austal has survived the US sequestration; and Inghams Enterprises has two players left for its chicken business, with an IPO investigation still to come.

Rip Curl, Billabong International

The owner of iconic surfwear company Rip Curl has reportedly put a planned $400 million sale on backburner because the market just isn't good enough.

The Australian reports that co-founder Brian Singer doubts the sale will go ahead at the moment, but he and co-founder Doug Warbick would exit the business in coming years when conditions improved.

"The public market looks like a bit of a cesspit at the moment,” said Singer, according to the newspaper.

It should be said that analysts thought the $400 million price-tag was a bit much – $300 million looked a bit more realistic.

But, the obvious question is whether the Rip Curl decision has anything to do with the troubles at its rival Billabong International, which is hoping to have takeover offers from suitor consortiums VF Corp-Altamont Capital Partners and Paul Naude-Sycamore Partners.

The important distinction is that Billabong has made a series of bad management decisions that chief executive Launa Inman is gradually unwinding. As Business Spectator's Stephen Bartholomeusz pointed out last month, there are "tentative signs” that Inman's turnaround strategy is working (Glimmers of hope in a Billabong bloodbath, February 22).

Rip Curl, like Billabong, is struggling with a subdued traditional retail sector, the rise of online shopping, the emergence of competing brands and the high Australian dollar.

The difference is that there was a time when it appeared Billabong was in so much trouble that it appeared to have little choice but to open the data room to suitors. The share price had fallen too much. Rip Curl is not in that position.

But to put these events into context, news emerged that Rip Curl was testing the market in September last year, when TPG Capital and Bain Capital were still talking to Billabong about an offer of $1.45 a share.

From the middle of this month, Inman should have an idea of whether the $1.10 proposals from her two bidders will stand up.

The Australian Financial Review believes that Morgan Stanley has picked up either an advisory or financing role with the VF-Altamont consortium. Not a bad sign at all.

Australand Property Group

The official starting gun for a deal for Australand Property Group has finally been sounded.

Yesterday, Australand informed the market, "it was working with its major securityholding, CapitaLand Limited, to establish whether any proposal arising from CapitaLand's strategic review of its investment in Australand can be developed that is in the interest of all Australand shareholders”.

First of all, Singapore's CapitaLand is Australia's majority shareholder – something the word 'major' doesn't do justice, particularly in a takeover scenario.

Secondly, it's the review of CapitaLand's roughly 59 per cent stake in Australand that really put the Australian property group on the chopping block.

Now interested suitors, of which Australand said there were "several”, can come in and have a look. GPT Group is obvious, as they've already declared their hand for everything except Australand's residential assets. Mirvac Group will probably also have a look, although they might be a little short on cash depending on the structure of the ultimate deal.

Would the Singaporeans accept scrip, as would be the case under a merger scenario between Australand and another local player?

The proponent of such a deal would have to make a pretty compelling case for a bullish Australian property market. Not just because CapitaLand wouldn't be getting a big pile of cash in such a deal, but it would also lose its majority control.

Rod Sims, Campbell Newman

Two senior public officials have made some pretty important utterances about headline-grabbing deals that have been the subject of recent speculation. One is pleasing, the other…not so much.

Australian Competition and Consumer Commission chairman Rod Sims told The Australian Financial Review that free-to-air broadcaster merger proposals that are on the horizon thanks to the pending changes in the ‘reach rule' would be assessed on the "here and now” – but he's open to them.

"If the diversity rules change, that unleashes merger activity,” he said, according to the newspaper.

Sims said he's bracing for a wave of activity – and rightly so. As Darren Davidson recalls in The Australian, previously changes to media law have been acted upon with breathtaking speed by the sector.

"When the government made changes to foreign ownership rules in 2006, James Packer sold what was then called PBL Media to British private-equity firm CVC Asia Pacific within hours of new laws being passed by parliament,” writes Davidson.

Sit by the phone, Mr Sims.

On the other hand, Queensland Premier Campbell Newman maintains that he has not yet been convinced that selling energy distribution businesses like Energex and Ergon Energy are a smart was of correcting the state's finances.

Admittedly, ‘can-do' Campbell says he hasn't read the Costello Commission's audit report on how to resurrect the Queensland state budget. But he's pretty consistently played down the notion of selling off the state's energy and port assets, which the report recommends.

This will not be welcome news to investment bankers starved of a state government asset sale advisory payday.

And if we could just jump back to the consumer watchdog for a moment, the regulator is a step closer to giving the green light to the trans-Tasman component of the Qantas Airways-Emirates alliance – this was it's only real area of concern.

The ACCC has released a set of draft conditions, the most important of which is that the airlines don't dip below their pre-alliance aggregate capacity for New Zealand flights.

Austal Limited

Australian shipbuilder Austal has sailed through the US sequestration disaster by getting the go-ahead to build two more warships with an estimated $US681.7 million ($665.2 million) for the US navy.

The two ships are part of larger contract for up to 10 combat vessels worth up to $US3.5 billion.

Shares in Austal surged 13 per cent as investors reacted with relief to the news that the local shipbuilder is clearly high enough on the US Navy's priority list that it won't be immediately impacted by mandatory, across-the-board budget cuts, brought about by a state of political lunacy in Washington.

Wrapping up

The sale process for Inghams Enterprises is coming to a conclusion, reports The Australian Financial Review, with private equity giants Blackstone Group, advised by Barclays, and TPG Capital the last ones left.

Inghams recently decided to run a dual process to examine whether an IPO would be a better option considering the state of the market. This continues.

Speaking of protracted discussions, gas explorer WestSide Corporation's talks with its mysterious suitor are still on, according to a statement from the board.

"The WestSide Board has decided to bring this process to a conclusion in the near term,” said the company, which is just as well. Discussions on the indicative proposal were first revealed in mid-December and all we really know is it's conditional, non-binding and at 52 cents a share.

Colourful German-born internet entrepreneur Kim Dotcom says Australians will be able to trade stock in his $1 billion dollar float of website Mega, which will be floated on either the ASX or NZ stock exchange within the next 18 months.

And speaking of New Zealand internet plays that leave us Aussies looking a little flat-footed, Trade Me, formerly owned by Fairfax Media, says it plans to offload its group-buying site Treat Me through a management buyout.

Elsewhere, Transfield Services has picked up $159 million worth of work in its infrastructure business between deals with the Land and Housing Corporation, TransCom Connect and the Department of Defence.

In geothermal energy, Green Rock Energy has signed a an exploration deal with AWE, which saw its share price jump from the lowest possible 0.1 cent, to 0.2 cent. It's a 100 per cent gain.

And finally, Empire Oil & Gas has appointed Macquarie Capital as its adviser to identify good tenements and farm-out agreements for its Perth and Carnavon Basin assets.