Breakfast Deals: Takeover turn-off

Rumblings are continuing to come from Canberra about politically charged deals at GrainCorp and Yancoal Australia. Expect more of that as the election nears. Meanwhile, controversy looms in the aftermath of James Packer’s Sydney casino win, Steadfast Group has reportedly trimmed its IPO ambitions and Barrick Gold is selling Aussie assets.

GrainCorp, Archer Daniels Midland, Yanzhou Coal

The tightening of opinion polls between the two major parties at a federal level as the election looms provides a useful backdrop to view ongoing comments from Canberra about big deals for Australian assets.

Nationals Senator Barnaby Joyce has called on reinstalled prime minister Kevin Rudd and new treasurer Chris Bowen to act on the $3 billion-plus takeover offer for GrainCorp immediately. He claims the decision is too important to be delayed until after polling day.

This morning the grains boss of suitor Archer Daniels Midland, Ian Pinner, writes in The Australian defending the deal, adding that the arguments of it being against the interest of Australia’s potential as Asia’s food bowl don’t make sense.

“GrainCorp represents the largest acquisition ADM has undertaken in its 110-year history. So it's been surprising to hear suggestions that ADM could be tempted to underinvest in its infrastructure or favour alternative markets. ADM invests to grow businesses, not shrink them; to create opportunity, not stifle it; and to support growers to achieve our shared goals,” Pinner writes.

Meanwhile, Liberal Senator Bill Heffernan has labelled the proposal by Yanzhou Coal to buy out the shares it doesn’t own in Yancoal Australia, reneging on an agreement with the Foreign Investment Review Board in the process, as a “mockery”.

Heffernan chaired a review of FIRB that concluded the underlying legislation for the board is out-dated and that the Yanzhou strategy constitutes a “red light”, according to The Australian Financial Review.

“This is a mockery and an insult to Australians,” he told the AFR.

When Yanzhou bought Felix Resources back in 2009, an agreement was made that a portion of its assets would be launched onto the ASX.

Poor IPO and coal market conditions were used as quite reasonable excuses and a merger with Gloucester Coal in 2012 was opted for as a backdoor listing to help keep the peace.

But Yanzhou was required to sell down its 78 per cent stake in Yancoal to 70 per cent. Now it’s trying to do the opposite.

“I do not know what it is in the mind of [Yanzhou] consolidating Yancoal offshore but obviously there were some things in the mind of FIRB when they said we think you should sell down and not buy up,” he said.

Just to be clear, the imminence of the federal election doesn’t make what either of these two men say wrong – or what other pollies will undoubtedly say in coming weeks.

It just shows that there’s extra incentive to voice something – anything – with voting day just around the corner and the latest polls now indicating that it’s now a dead heat.

James Packer, Crown, Echo Entertainment

Crown and Echo Entertainment were never going to kiss and make up after slagging each other off in the lead up to the New South Wales casino decision. But it’s difficult to imagine the aftermath of James Packer’s victory going this poorly, this quickly.

The Australian Competition and Consumer Commission is reportedly investigating allegations that billionaire Packer had a meeting with Echo chairman John O’Neill during which he said Crown would stay out of Queensland if Echo “behaved” itself “vis-a-vis Sydney”.

That’s a big allegation in the Fairfax Media pages, which comes on the back of more jabs from O’Neill at Packer.

Steadfast Group

Insurance broking company Steadfast Group’s initial public offering has been reduced by 29 per cent to $334 million after various insurance brokers elected to take a stake in the listing.

A number of brokers elected to receive shares in Steadfast, meaning 278-334 million shares will be issued in the IPO, according to a replacement prospectus, less than the maximum 469 million indicated in the original prospectus. The indicative price range is $1 to $1.20 per share.

The date to look for is July 30.

Wrapping up

Barrick Gold is reportedly stepping up its efforts to sell Australian assets with its Barnicoat Gold Project in Western Australia on the chopping block.

The Australian Financial Review also believes that Barrick is in talks to sell its 51 per cent stake in the East Kundana gold mine.

Meanwhile, engineering giant WorleyParsons has won a management services deal for a multi-billion dollar US gas project with energy group Sasol.

WorleyParsons didn’t give us any insight as to what take it’ll get, but the project is big money, potentially as much as $US21 billion ($23.00 billion).

Elsewhere, National Australia Bank has launched a landmark project with China’s largest agricultural group to help famers access China’s surging growth.

NAB has inked a memorandum of understanding with state-owned China National Agricultural Development Group Corporation to help farmers get access to more cash.

And finally, the federal government has flogged $700 million in Treasury bonds, which attracted bids of $2.335 billion, a ratio of coverage of 3.34.