BREAKFAST DEALS: Testing Tinkler

Nathan Tinkler breaks his silence on Whitehaven funding, while the Diggers and Dealers conference nabs its first takeover offer.

Plenty has been said recently about Nathan Tinkler's big tilt at Whitehaven Coal, but none of it has come from the dealmaker's lips. This morning, the secretive coal baron breaks his silence about the privatisation, which he expects to come together within days. In other resources news, Silver Lake Resources' takeover of Integra Mining offers a sign of things to come, while Fortescue Metals Group is expected to stay out of deals headlines for now. Elsewhere, Gina Rinehart takes a new swipe at Fairfax and Gunns may have given up on Bell Bay.

Whitehaven Coal

Nathan Tinkler expects to finalise his $5.3 billion bid to privatise Whitehaven Coal within a week, and the coal baron may also seek to lead the new company.

In an interview with The Australian, Tinkler was upbeat about his $5.20-a-share offer for Whitehaven after touring bankers around the company's assets in New South Wales. He's now waiting to hear back about a funding agreement.

Doubts emerged about Tinkler's ability to finance the mega-deal when only 48.3 per cent of Whitehaven's register expressed interest in rolling their stakes into the new company, subject to a satisfactory due diligence process. Whitehaven shares last traded at $3.66, well below Tinkler's offer price.

But the coal baron seems confident his potential creditors are happy enough with Whitehaven's assets to fill the equity void. He wouldn't comment on the size of the loan he's chasing, except to say it was less than the $2.5 billion speculated in the market.

He expects to hear back from the bankers by the "end of this week, early next week, to get something firm to piece the equity together to then go back to Whitehaven and put something forward."

If the deal does go through, Tinkler also suggested he might make a good chairman.

Integra Mining, Silver Lake Resources

One day in, and the Diggers and Dealers conference has already generated a substantial takeover offer: Silver Lake Resources wants to swallow Integra Mining.

Integra has agreed to a buyout bid worth about $426 million, in which shareholders will be awarded one Silver Lake share for every 6.28 Integra securities they hold. That values Integra shares at 45.2 cents – a 44 per cent premium to the company's closing price on Friday.

Under the deal, the merged company would produce 200,000 ounces of gold annually, with resources totalling 6.6 million ounces. Integra shareholders would own about 40 per cent of the combined group.

As junior miners struggle to go it alone in the current environment, plagued by lower commodities prices and tighter credit markets, expect more deals like this at the smaller end of town.

Fortescue Metals Group

Fortescue Mining Group has tapped lenders for another $US1.5 billion ($1.4 billion) of debt funding, but it might be the last big deal we see from Australia's third-largest ore miner for some time.

The new funds, including a $US750 million revolving-credit facility and a $US750 million term loan, will be put towards the expansion of Fortescue's iron ore operations in Western Australia. Both facilities were underwritten by Bank of America Merrill Lynch.

The deal was worth significantly more than the $US1 billion Fortescue flagged last month, apparently to protect the company from ongoing uncertainty in global commodity and financial markets. It seems a smart move, given the price of iron ore has crashed below $US120 a tonne, which was widely regarded as its floor.

While Fortescue's debt agreement is rightly viewed as a long-term commitment to the China growth story – the miner aims to triple production in the Pilbara to 155 million tonnes over the next 12 months – it came with a separate warning about the need for smaller commodities companies to consolidate and pay down debts.

As Fortescue hunkers down, don't expect any ambitious acquisition announcements from chief Andrew Forrest.

Fairfax Media, Hancock Prospecting

Gina Rinehart's Hancock Prospecting has renewed its bid for board representation at Fairfax Media, taking aim at the comparatively "diminutive shareholding" of the company's chairman, Roger Corbett.

In an open letter to Fairfax investors, Hancock also reasserts it has never sought full control of the media company, and again highlights "significantly declining shareholder value" under Corbett.

The document, penned by Hancock's chief development officer, John Klepec, calls for new performance requirements for Corbett and changes to the board's governance principles to allow directors free choice when it comes to adhering to the "union charter” of editorial independence. The latter has proved the biggest barrier to Rinehart entering the boardroom.

Klepec says Corbett only owns a 0.004 per cent stake in Fairfax, compared to Hancock's interest of just under 15 per cent. In turn, the mining executive renews a request for two board nominations, "as is common practice."

There's really nothing groundbreaking in the letter, although Rinehart's continued correspondences do come as sore reminders that Fairfax's share price is still plumbing historic lows, with no end in sight. There must be fears at Fairfax that a loud, unrepresented Rinehart will begin to make inroads into an increasingly dissatisfied investor base.

Over to you, Roger.


Gunns is less confident it will find a partner to develop its $2.3 billion Bell Bay pulp mill, as the embattled timber company wipes up to $800 million from the value of its forestry assets.

The writedowns, expected to be delivered with the company's full-year results, come as Gunns revalues the troubled Bell Bay project at market price, rather than on the assumption the mill will proceed.

As the company explained in a note to the ASX: "The decision taken by the board does not necessarily mean that the Mill Project will not proceed. Rather, it is an indication of decreased confidence from the Company that it has the ability to influence the Mill Project proceeding.”

The impairments also bring Gunns' net tangible assets deep into the red, with a worst-case value of negative $150 million.

The announcement is hardly a vote of confidence as Gunns continues to hunt for investors.

Wrapping up

Hastings Diversified Utilities Fund could have a new binding takeover offer to consider by the end of the week, as the gas pipeline company invites APA Group into its data room.

HDF has agreed to terms and conditions for the disclosure of information to APA, while APA will share with its target confidential details about its own financial position and outlook.

The agreement is sure to put pressure on rival bidder Pipeline Partners Australia, whose lower offer currently has the support of HDF's independent directors. Its cash bid values HDF shares at $2.325, while APA says it could offer up to $2.50 per share in cash and scrip, subject to a good look though HDF's accounts.

APA has previously said it could complete due diligence within a week, but sources told The Australian Financial Review a firm offer could materialise "within days."

Meanwhile, James Packer's grand expansion plans have been dealt a blow, after ratings agency Moody's warned Crown's credit rating might not support its spending binge.

If Crown pushes on with plans to buy a 25 per cent stake in Echo Entertainment and build luxury hotels in Perth and Sydney, and funds those ambitions with new borrowings, the company's debt to earnings ratio would likely rise above three times, according to a Moody's note cited in The Australian Financial Review.

Moody's previously warned it might downgrade Crown's Baa2 rating if its debt to earnings ratio rises about 2.5 to three times.

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