BREAKFAST DEALS: Taking Tully

Another Australian agri-asset goes to foreign hands as COFCO wins the race for Tully and the deal might actually be good for the sector despite the political hand-wringing. In resources news, Fortescue is eyeing a return to the debt market, Japan's Mitsubishi UFG buys a slice of Lynas and Murchison Metals takes a beating in the market. Meanwhile, Fairfax Media may have caught the online retail bug, Borders and Angus & Robertson websites find a home, Collins Foods' IPO is far from a done deal, and Sonic Healthcare has picked up colourful medico Geoffrey Edelsten's chain of GP clinics for less than $100 million.

Tully Sugar, COFCO, Bunge

China's COFCO Corporation has pretty much stitched up the race for Tully Sugar, increasing its relevant interest in the target to 61.25 per cent. The new stake includes the 6.9 per cent share US agribusiness Bunge held in Tully. COFCO said that gaining a significant majority has removed any "ongoing ownership uncertainty” and it can now concentrate on delivering its promises to Tully shareholders and growers. Bunge pulled out of the race earlier this week and now COFCO's sole rival Mackay Sugar has also called it quits, with its chairman Andrew Cappello telling Fairfax Media that the takeover battle was over. It looks like the Chinese suitor's sweeter $44 a share offer, valuing Tully at $136 million, was too good to turn down and we will have to wait and see what Mackay decides to do with its 30 per cent stake. COFCO's success means that another Australian agricultural asset, and one of the last major sugar assets in northern Queensland, will now be in foreign hands. CSR's sugar assets are owned by Singapore's Wilmar, while Bundaberg Sugar is owned by Belgium's Societe Financiere des Sucres. Maryborough Sugar is 20 per cent owned by Malaysian interests. Now from a market point of view, COFCO's entry is a good sign for further consolidation in the industry, but it comes at a politically sensitive time and no doubt there will be a fair dose of bile that will be spilled on the issue. Independent MP Bob Katter has reportedly expressed anger over the deal saying that it's another example of the government's callous disregard when it comes to selling the farm. Nationals Senate leader Barnaby Joyce has also expressed his disappointment, telling The Australian that the deal demonstrated the need for closer scrutiny of foreign investment in rural industry. However, the bottom line is that a majority of Tully's grower shareholders don't have problem with Chinese ownership as long as the business is run profitably.

Fortescue Metals, Murchison Metals, Lynas, Griffin Coal

There's plenty of action in the mining sector, with Fortescue Metals Group eyeing a return to the debt market, a Japanese bank taking a slice of rare-earths miner Lynas Corporation and Murchison Metals' stock suffering its biggest single-day fall. We start with Fortescue, which has flagged its intention to return to the debt market some time this year to help raise capital for its planned $US8.4 billion iron ore expansion. The miner's chief financial officer Stephen Pearce has told the market that it is still working out what approach it will take and which markets it will access. Fortescue sold $3.54 billion of high-yield bonds in the US market last year and recently scrapped a plan to raise $US1 billion, saying it did not like the terms of the offer. For Fortescue it's a question of resisting the temptation to fund the massive expansion – which will almost triple its iron ore production – through its existing cash flows, but as Pearce said, he is looking for certainty and is keen to seek a "healthy buffer” in the current environment. That seems to be a sound strategy, given that it provides protection against budget blowouts. Pearce also shed some light on the recent $US500 million revolving facility, which was secured in lieu of the $US1 billion debt issue. The size of the facility, which is Fortescue's first bank debt, had been boosted to $US600 million with nine lenders taking part instead of the initial five. It was priced at a margin of 325 basis points and Pearce points out that it's a clear sign of Fortescue's improving credit profile. Fortescue has a credit rating of B from Standard & Poor's but Pearce thinks it could obtain an investment-grade credit rating very soon.

Meanwhile, Japan's Mitsubishi UFG Financial Group has bought a 9.99 per cent stake in rare earths developer Lynas Corporation, in a transaction worth $324 million at current prices. Lynas told the market that Mitsubishi had bought 170.1 million Lynas shares in a number of transactions between May 24 and June 7. The news reportedly generated a lot of excitement among brokers but The Australian Financial Review points out that it was short-lived after a quick look at the release showed that Mitsubishi has picked up the stake because it owns more than 20 per cent of Morgan Stanley, which is a substantial holder in Lynas. So it's all by the book and not nearly as exciting as the situation Lynas is tackling over the refinery plant in Malaysia. The company's offices yesterday were the scene of a small but vocal protest from a dozen or so Malaysian activists who voiced their opposition to the plant.

Elsewhere, Murchison Metals took a beating yesterday, falling 23 per cent, as any goodwill in the market about the management overhaul quickly evaporated. The enormity of the task facing the new management has led to a flurry of broker downgrades, with many convinced that a positive outcome for the miner is on a knife edge. Adding to Murchison's woes is the fact that key foundation partner for the Oakajee Port and Rail project, Sinosteel, has reiterated its displeasure with the miner. According to Sinosteel, the newly released feasibility studies change nothing, with Sinosteel Midwest Corporation's chief operating officer Julian Mizera telling The Australian that Murchison needs to present a revised tariff structure and clarify what changes will be needed to OPR to achieve that.

Fairfax Media, Ozsale

The online retail fever seems to be catching and, after James Packer's recent forays into DealsDirect and CatchofTheDay, it's Fairfax Media's turn to have a go at the sector. According to The Australian Financial Review, Fairfax is in early discussions with daily deals website Ozsale,com.au to buy a stake in the daily deals site at a price that values the whole business at as much as $120 million. The paper adds that Ozsale is essentially up for sale and if the talks with Fairfax don't deliver an outcome then Macquarie Capital will run an auction process for the business. Ozsale is really more of an online shopping club that offers a host of discounted products to its members, rather than Scoopon or Groupon that provide a single deal a day. Ozsale has about one million members in Australia and over 700,000 in New Zealand and Singapore, the paper added. Traditional retailers may be in a spin at the moment but Ozsale and its rival brandsExclusive are posting solid growth. If Fairfax does decide to walk away then the likes of David Jones and Myer should be interested in the sale process.

Pearson Australia, REDgroup

It looks like the online businesses of Borders and Angus & Robertson have found a new home with book publisher Pearson Australia Group, which is making its first foray into online retailing with the deal. Pearson Australia, which is part of global media company Pearson, has reached an agreement with REDgroup's administrators Ferrier Hodgson to pick up the websites for an undisclosed sum. The deal means that the 16 or so staff involved with the running of the sites will not join the hundreds of employees who lost their jobs in April. Pearson, the publisher of The Penguin Group, The Learning Ladder and United Book Distributors, has also reached an agreement with eBook retailer Kobo to ensure that those who bought the eBooks through the online sites will continue to have access. However, the move has already prompted a response from The Australian Booksellers Association, which has reportedly asked the Australian Competition and Consumer Commission to have a stern look at the deal and its implications on competition.

Collins Foods IPO

Private equity owned fast-food group Collins Group looks like the only one flying the IPO flag in the local market for the time being, but it's no certainty. Collins, owned by Pacific Equity Partners, plans to raise up to $238 million in an initial share offering, which would make it the largest IPO in the local market this year since Barminco decided to pull the plug on its float. According to Reuters, Collins will offer 81.6 million shares at a price range between $2.50 to $2.92, implying a multiple of between nine and 10.5 times 2012 earnings. However, a decision to lodge the prospectus is still pending and the final fate of the float still depends on how institutional investors respond and what state equity markets are in at the time. Deutsche Bank and UBS are joint lead managers for the Collins float.

Wrapping up

There are fresh reports that Sonic Healthcare has bought Geoffrey Edelsten's chain of GP clinics, Allied Medical Group. Speculation of a deal first emerged last week with talk that Sonic was set to pay close to $200 million for the clinics. That number seems to have been revised with Sonic reportedly grabbing the business through its Independent Practitioner Network for under $100 million. Meanwhile, the AFR reports that a part of engineering firm Clough's loss-making marine construction business may be in the sights of a Malaysian suitor. A strategic review of the unit has been going on for at least eight months. Engineering group Monadelphous Group has bought asset management company PearlStreet, a wholly-owned subsidiary of Campbell Brothers Limited, for $4 million. PearlStreet manages two long-term operations and maintenance contracts in the power sector in Western Australia. Elsewhere, manganese miner OM Holdings has scrapped its proposed dual listing in Hong Kong, citing unfavourable market conditions and the uncertainties associated with the legal proceedings brought by its largest shareholder Consolidated Minerals. OMH and Consmin have had a testy relationship for the last couple of years and things came to a head when OMH announced its plans to list on the Hong Kong market. Consmin launched legal proceedings in the Federal Court in May to halt the second listing and looks to have had its wish fulfilled. Elsewhere, John Singleton's Macquarie Radio Network has concluded a heads of agreement to acquire eight commercial radio broadcasting stations from the Smart Radio Network in Queensland. The agreement is subject to satisfaction of customary conditions including securing finance, board approval and the conclusion of a long form agreement. Finally, Kohlberg Kravis Roberts has joined forces with Everest Babcock & Brown founder Jeremy Reid to promote a new fund. According to Fairfax papers, KKR and Reid's Indigo Investment Group will market KKR Mezannine Partners Fund to high-net wealth investors.