BREAKFAST DEALS: Tinkler tales

All eyes are on Nathan Tinkler as Whitehaven and Aston agree to a merger, while Extract steps closer to China.

Whitehaven Coal and Aston Resources have agreed to form the next major force in Australian coal. The deal will create a $5.1 billion player with the muscle to rival that of Macarthur Coal and New Hope, the former of which has been snapped up by US giant Peabody Energy, while the latter is currently in the midst of a sales process. Elsewhere in coal, the late Ken Talbot's investment company has found a preferred bidder for its Mozambique deposit, while in uranium Extract Resources is a crucial step closer to a Chinese bid. Meanwhile, valuations for the NSW desalination plant privatisation will have to be tweaked, AMP Capital has capped off a historic year with a Japanese alliance and reports are firming that Kerry Stokes has picked up a piece of Ten Network.

Whitehaven Coal, Aston Resources

Before last week the market had forgotten about the possibility of Whitehaven Coal and Aston Resources tying the knot; there was more interest in a possible float of Nathan Tinkler’s Boardwalk Resources in 2012. Now the two companies have agreed on a deal to create a $5.1 billion coal force to be reckoned with and as expected, Whitehaven boss Tony Haggarty will head the new group. Aston deputy chairman Mark Vaile will take the chairmanship at the new company, while his counterpart at Whitehaven will take the deputy's position. Current Aston chairman Tinkler, as expected, does not appear to be seeking a board seat. The joint statement says that Tinker has indicated he will vote in favour of the deal, which means 38 per cent of Aston's shares are already in support of the merger. Crucially for Tinkler, the deal includes Boardwalk Resources, his privately held coal company. Meanwhile, the statement says that 43 per cent of Whitehaven shareholders have indicated they intend to vote in favour of it.

Aston shareholders will receive 1.89 Whitehaven shares for each Aston share they hold, after the distribution of a fully franked dividend to Whitehaven shareholders of 50 cents per share. For Boardwalk Resources, it's a little more complicated. On face value the merger agreement says that the combined market valuation of $5.1 billion is based on the closing share prices of Whitehaven and Aston on Friday, plus the value of Boardwalk. With Whitehaven closing with a market cap of $2.9 billion and Aston finishing with $2.0 billion, it implies Boardwalk has a value of $200 million.

But the statement also says Boardwalk will receive 85.88 million Whitehaven shares, which at current prices are worth $500 million. However, Boardwalk's shareholders will also contribute $150 million in cash to Boardwalk for ongoing development, and the company has a debt of $US50 million. Boardwalk shareholders will also be entitled "to an additional 34.02 million Whitehaven shares upon receipt of mining leases and environmental approvals" at any two of five of its projects.

Earlier reports suggested that Rothschild’s independent valuation of Boardwalk was about $100 million, whereas Tinkler was hoping to sell it for between $650 million and $750 million. While it'll take some time for the exact value of Boardwalk to be realised, it's clear that Tinkler's dealing has brought the valuation a lot closer to his estimations.

Whitehaven is getting financial advice from Grant Samuel and Goldman Sachs, while Corrs Chambers Westgarth and McCullough Robertson are handling the legal side of things. Meanwhile, UBS and Credit Suisse are looking over financial matters for Aston, with Freehills serving as its lawyer. Over at Boardwalk, Queen Capital, Morgan Stanley and Gilbert Tobin are assisting.

Whitehaven-Aston isn’t the only place where the action is in coal at the moment. Aside from New Hope’s sales process that is hoped to top $5 billion, Anglo American has reportedly been named the preferred bidder for the controlling 59 per cent stake in a $US1 billion undeveloped Mozambique deposit, owned by the late Ken Talbot. According to News Limited, Talbot Investment Group has picked Anglo American to take the asset as it winds down. The deal is still to be closed and the report indicates that this may take months.

Extract Resources, Kalahari Minerals, China Guangdong Nuclear Power

Extract Resources boss Jonathan Leslie is ending 2011 on a high of sorts, with a $2.2 billion takeover offer on the horizon if all goes well. Extract’s largest shareholder, the UK’s Kalahari Resources, has finally received a £632 million ($A979 million) offer from China Guangdong Nuclear Power following two periods of discussions and ongoing speculation that has lasted almost all year. Kalahari’s 43 per cent shareholding in Extract triggers a $2.2 billion downstream takeover offer for Extract, if Guangdong can get a majority stake in Kalahari.

The prize for Guangdong is Extract’s Husab uranium deposit in Namibia, which has been touted as the fourth largest in the world. But the lingering presence of Rio Tinto on the registers of both Extract (14 per cent) and Kalahari (11 per cent) will be an interesting detail to watch, particularly given that Rio’s Rossing uranium mine neighbours Husab and the Australian miner has just purchased another uranium hopeful, Canada’s Hathor Exploration, for $C654 million ($642 million).

AMP Capital, Mitsubishi Financial Group

AMP is set to expand its footprint in Japan through an alliance with Japanese giant Mitsubishi UFJ Financial Group. Mitsubishi has forked out $425 million for a 15 per cent stake in AMP Capital, which also allows the Japanese firm to tap into Australia’s superannuation pool. AMP boss Craig Dunn must be pretty satisfied with his year, having secured the $14 billion takeover of rival AXA Asia Pacific – in conjunction with AXA’s French parent company – and getting this deal with Mitsubishi as a sweetener. "Our alliance with MUTB will accelerate AMP's growth into the Asian region through our investment management business, will help cement AMP Capital's position as a leading international multi-class asset manager and will complement the existing strategic relationships we have in the region," Dunn said in a statement.

NSW Kurnell desalination plant

It was initially thought that the NSW government could fetch up to $2 billion for the privatisation of the Kurnell desalination plant, but those expectations have taken a bit of a hit. The Independent Pricing and Regulatory Tribunal has declared that the plant will be limited to a 6.7 per cent return on assets, which it considered were still generous, but the previous valuations of bids were based on a higher figure. A consortium including Spanish infrastructure group Acciona and water utility Trility has reportedly submitted its interest in the plant, as well as a partnership between Queensland Investment Corp and Deutsche Bank’s infrastructure fund management arm RREEF, plus Industry Funds Management, which will be advised by Macquarie.

Kerry Stokes, Seven Group Holdings, Ten Network

Media and mining equipment billionaire Kerry Stokes has kept up his recent streak of mischievous manoeuvres, with more media reports indicating that he’s taken a stake in Ten Network, said to be a little over 2 per cent, through a company called Seven (WAN) Pty Ltd. Because Stokes holds the Seven Network licence, he’s prohibited from holding more than 14.9 per cent of the register and given that Seven isn’t in the trouble that rival Nine Network is, it’s hard to see what his play is here. The Ten register is getting quite crowded with a number of big names, including Bruce Gordon, James Packer, Lachlan Murdoch and Gina Rinehart.

Stokes has previously offered some rather discouraging forecasts for rival Nine Entertainment, predicting that it will be in the hands of its banks within 12 months. Private equity owners CVC Asia Pacific, of CVC Capital Partners, has been negotiating with lenders to try to refinance Nine’s nearly $3.8 billion debt to – needless to say – varying success. Late last week, CVC Capital Partners had to step in, with News Limited reporting that the company says speculation has been "misleading and inaccurate”.

Wrapping up

Despite all the protest it could muster, Tully Sugar has given up the chase for the Proserpine Sugar Mill. KordaMentha picked an offer from Wilmar International’s Australian sugar arm Sucrogen and that has ultimately won over the creditors, despite objections from Tully – owned by China Oil and Food Corporation – that it had the superior offer. The writing was on the wall last week when court documents pushed Proserpine debt held by Westpac Bank into the hands of Sucrogen.

BlueScope Steel shareholders will get their say over the $600 million capital raising on Wednesday when they decide whether to take up their rights, or shift the burden onto underwriters at Credit Suisse. BlueScope is set to benefit from the federal government’s decision to bring forward its Steel Transformation Plan, from which BlueScope will get between $100 million and $180 million, and Fairfax understands the steelmaker will go ahead with $100 million in non-core asset sales once markets pick up.

And finally, Telstra looks set to get the final tick of approval from the Australian Competition and Consumer Commission for its structural separation in February, after submitting a revised submission document. The consumer watchdog’s blessing will pave the way for the telco’s $11 billion deal with the government.

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