BREAKFAST DEALS: Telstra triumph

Telstra revels in the sale of its New Zealand subsidiary, while Perpetual creeps up Echo's register.

Telstra’s coffers are overflowing just a little more after offloading its New Zealand subsidiary. What will it do with the cash? There are a few movements between Perpetual and Echo Entertainment to keep an eye on. Elsewhere, CSR has started speaking openly about its potential as a takeover target and Australia is making a good showing for itself in global M&A, even if the market is in a poor state.

Telstra Corporation, TelstraClear

Telstra Corporation has an even bigger war chest for acquisitions after the long-awaited sale of its New Zealand subsidiary TelstraClear.

Vodafone New Zealand has forked out $NZ840 million ($660 million) for the business, which was well ahead of analyst valuations that didn’t go much higher than $400 million.

Telstra will repatriate around $NZ490 million through what it’s calling a "pre-completion” dividend.

The sale will leave Telstra with more than $3 billion in free cashflow, which is largely thanks to the payments from the NBN deal with the government.

While chief financial officer Andy Penn will be gleeful with the amount of money the telco has lying around, The Australian reports that the telco executive says it will not add to the pile with a sale of its struggling Sensis business.

The advertising and directories arm has been battling hard for some time, but Telstra will continue to restructure it instead of selling the business and spending the proceeds on something else.

Penn also said the company wouldn’t be rushed into making a purchase.

"Obviously, acquisitions are an opportunity within the context of our overall strategy… particularly where they add capability for us,” Penn told The Australian.

"But we don't have a particular bias towards organic or inorganic growth."

Telstra executive Rick Ellis recently rejected reports that the telco is having a look at Nine Entertainment.

Perpetual, Echo Entertainment

Fund manager Perpetual hasn’t dawdled in increasing its stake in Echo Entertainment after getting approval from the Australian regulators to go above 10 per cent.

Echo released a statement yesterday indicating that Perpetual has once again become a substantial shareholder – just barely – with its stake increasing to 5.08 per cent.

It’s a curious dance that Perpetual is playing with Echo, which is probably far less significant that the application for a larger than 10 per cent stake would suggest, given that it’s nowhere near that level. But it’s something worth keeping an eye on.

Meanwhile at Echo, the gaming company announced the completion of the retail component of its capital raising.

The 1-for-5 accelerated renounceable entitlement offer didn’t set the register on fire, with just 67 per cent take-up by eligible shareholder.

The remaining shares, about 19 million of them, are now on sale.

Back at Perpetual, the company has sold its residential mortgage processing business to the local unit of US behemoth First American Financial Corporation.

The terms of the deal were kept confidential.

CSR

CSR shareholders would have been going into yesterday’s shareholder meeting hoping for some news on the aluminium division. Would it be sold?

Chairman Jeremy Sutcliffe gave them a little more than that, saying not just the aluminium unit could be sold off at the right price, but so could the whole company.

CSR shares are dwindling at 20-year lows thanks to a sluggish construction market, poor aluminium prices and as loss-making Viridian glass business.

To give shareholders some optimism, Sutcliffe said the aluminium business could be offloaded and CSR itself could be a target – with a share price that low, there’s plenty of margin for interest.

CSR is waiting to see what Rio Tinto will do with its aluminium division, because the mining giant majority owns the Tomago smelter. CSR holds a 70 per cent stake in Gove Aluminium Finance, and subsequently a 25 per cent stake in Tomago.

The building materials company has been kicked around by a few commentators as a potential takeover target, this is the first time the board has chimed in on the issue.

But there’s little else encouraging for shareholder.

"Business and consumer confidence is so low in Australia today, which is in part driven by the political landscape against a backdrop of global uncertainty,” said Sutcliffe.

"There is no great cause for optimism in these dire conditions we face.”

Allen & Overy

The global mergers and acquisitions market might be subdued, but Australia can take some pride with a relatively strong showing in Allen & Overy’s ninth M&A index.

The international legal firm’s report indicates that in the first half of 2012, Australia came in sixth for inbound transactions, with 15 worth a total of $US6.69 billion. The United States came in first with 65 deals worth a total of $US62.67 billion, followed by the UK and Canada.

For outbound transactions, Australia ranked 16th with just five transactions worth a total of $US4.75 billion. Again, the US ranked first with 84 deals worth $US69.14 billion, followed by Japan and the UK.

The report noted Australia’s place in the global commodities trade as a key reason for its relative success. Although it also took some notice of the renewed interest in media assets, specifically News Limited’s bid for Consolidated Media Holdings.

One of the countries that Australia might be disappointed to see in the top three is not the sunburnt country, but China.

The report says that China’s stronger currency has improved the conditions for the Red Dragon, but deals in Greater China dropped significantly in the first half compared to the same time last year.

Meanwhile, another M&A report issued to the market yesterday, this one from Clayton Utz, expects company board to show a greater willingness to talk to private equity suitors to avoid being embarrassed when the share price falls afterwards.

Wrap up

Mid-size life insurer Clearview Wealth has been put in play by Crescent Capital Partners with a 50-cents a share, $200 million bid.

But it’s likely to fall on deaf ears for the moment. Major Clearview shareholder Guinness Peat Group, which has almost 50 per cent of the target, indicated that it’s likely to hold out for something better.

''The price offered represents a substantial discount to the fair value of Clearview Wealth and is wholly inadequate,'' GPG said in a statement.

Meanwhile, agricultural chemical company Nufarm has announced that it will collaborate with its largest shareholder, Sumitomo Chemical, on distribution in Italy as of August 1.

In mining, BHP Billiton is reportedly thinking about offloading its aluminium assets in Brazil.

According to the Financial Times, BHP has appointed advisers to investigate a sale of Alumar aluminium and Mineracao Rio do Norte bauxite mine joint ventures.

For today, keep your eye out for DuluxGroup. In all likelihood, the paints company will announce another extension to its $188 million offer for Alesco Corporation with more shareholders throwing their support behind the proposal.

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