BREAKFAST DEALS: Telstra sell-down

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Some big block sales for Telstra and UBS, Macquarie Group seen on the prowl for yet another foreign acquisition, this time in London, and Rio Tinto's Tom Albanese reads the tea leaves on Chinese iron ore sales prices. Also, AMP flags new acquisitions and the ASX tips a rise in bond market activity and more.

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Telstra Corporation

The Future Fund has sold down its shareholding in Telstra Corporation from 16.4 per cent to 10.9 per cent, a share sale with a $2.37 billion market value. The massive effort was run by UBS, with Caliburn Partnership acting as independent advisors on the process. Caliburn had previously worked on the Commonwealth government's $16 billion sell-down of Telstra shares and on the transfer of the balance to the Future Fund. The delicate art of the block sale is something of a Caliburn speciality. The investment bank has previously worked with British Airways on the trade of $1.1 billion Qantas Airways shares and Rio Tinto's $400 million sale of 14.25 per cent of Lihir Gold. Caliburn's 'blind date' method for block trading has subsequently been used in capital raisings. UBS has also worked with Telstra and the government before, notably on that last 52 per cent government sale of Telstra shares: Telstra 3. UBS worked alongside ABN Amro and Goldman Sachs JBWere, on that mandate, but beat its rivals to secure the T3 scoping study. UBS was not involved in T1 or T2 due to its role in the Optus initial public offer, but brought with it valuable experience from work with China Telecom, Hong Kong's Peoples Telephone and Singapore's Star Hub. The Future Fund has long told the market it would reduce the large exposure its $60 billion portfolio has to the telecommunications company. The fund has said that it won't sell any more Telstra shares for 180 days, other than through the company's dividend reinvestment plan.

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Used to Be Swiss

Speaking of block sales and venerable Swiss banking houses, the government of Switzerland has just sold ChF5.5 billion of UBS shares in a process managed by Credit Suisse, Morgan Stanley and – strangely – UBS as well. The finance ministry said the order books were oversubscribed multiple times at the top end of its price range. Switzerland bought the stake at the nadir of the credit crunch and the sale comes just days after Switzerland's landmark agreement with the United States government to reveal the identities of thousands of its American clients to the Internal Revenue Service. Other private banks, like Credit Suisse and Julius Baer (seen in this column preparing to buy ING Groep's assets in Asia) has been watching the process with trepidation. Switzerland says its fabled banking secrecy laws have not been affected by the US deal, but many think otherwise. Some are predicting that financial centres Dubai, Singapore and Hong Kong will come to replace Switzerland's role in the world of private banking.

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Macquarie Group

Fresh from announcing the launch of two new China infrastructure funds worth $1.2 billion and the $516 million acquisition of Delaware Investments from Lincoln Financial Group, Macquarie Group is reportedly in the market for another takeover. Earlier this year, Macquarie purchased Tristone Capital, an energy advisory company, and the gas trading business of Constellation Energy. The silver doughnut is now reportedly in "serious discussions” with London-based corporate advisory firm Fox-Pitt Kelton, according to the Wall Street Journal's mergers and acquisitions blog. Fox-Pitt could be worth $US150 million, sources told the DealJournal blog, double the value of what major private equity shareholder JC Flowers paid in 2006. Fox-Pitt, with 285 employees specialising in equity research, M&A advice and capital raisings, has been a rare bright spot in the Flowers portfolio, which includes the near-comatose Hypo Real Estate Group. It's recently been rumoured that Flowers has been running the ruler over Suncorp-Metway.

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Rio Tinto

There's plenty for investors to mull over following Rio Tinto's results announcement late yesterday, where it posted a 54 per cent fall in underlying earnings to $US2.56 billion. Of particular interest however are its comments on iron ore pricing, with chief executive Tom Albanese saying that the global company is "primarily selling at provisional pricing", being the new benchmark set with Japanese steel mills in May, despite China's official recalcitrance. It's been thought that the impasse with China's lead price negotiator, the China Iron and Steel Association (CISA), could soon be at an end, with CISA being replaced by the friendlier face of Baosteel, which successfully negotiated a new benchmark with Fortescue Metals Group just this week. For the sake of normal trade relationships and the four Rio Tinto employees arrested in Shanghai on what appear to be trumped-up and politically-motivated charges, let's hope a new deal can be found soon.

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Wrapping up

AMP boss Craig Dunn has flagged acquisitions in the coming year as his company reported a first-half profit of $362 million. Dunn said AMP would go to the capital markets if it found something suitable to buy, but otherwise has a space $1.12 billion above the regulatory minimum, which could also be employed. AMP was under-bidder to the National Australia Bank in the Australian assets of British insurer Aviva. Elsewhere, the Australian Securities Exchange has said growth in the listed corporate debt market is probably brighter than it's ever been and finally, India's Bharti Airtel, 30 per cent owned by Optus parent Singapore Telecommunications, has extended merger talks with South Africa's MTN Group for a second time.