BREAKFAST DEALS: Tinkler time

Nathan Tinkler, for the moment, has some important lenders behind him that will help make a private Whitehaven Coal a reality. Although it looks like he’ll use the next four weeks of due diligence to recruit some more troops. Meanwhile, Seven West Media could pull the trigger on a capital raising as early as this morning. Elsewhere, DuluxGroup can’t quite call its Alesco Corporation bid final just yet, the battle for Hastings Diversified Utilities Fund has just got more complicated and ASIC has passed over a couple of takeover reform ideas to Treasury.

Whitehaven Coal, Nathan Tinkler

Check out what level Whitehaven Coal shares end up rising to this morning. That’ll give an indication of how much the market backs the ability of Nathan Tinkler to do yet another transformative deal.

On Friday evening, Whitehaven announced that Tinkler Group had lobbed a conditional bid of $5.20 a share, via a scheme of arrangement. Tinkler is leading a consortium called BidCo – if in doubt on a name, play the straight bat.

The $5.2 billion proposal is a 51 per cent premium to Whitehaven’s closing price, though it’s subject to due diligence, which has been granted. It also values Tinkler’s 21.4 per cent stake at $1.11 billion.

Tinkler Group indicated that 48.3 per cent of the register has "expressed interest in rolling their shares into BidCo”, adding that an extra 16.7 per cent in unlisted scrip may be made available. If that isn’t filled, Tinkler has to find another $877 million in equity funding.

This shows what Tinkler will be doing over the next four weeks while conducting due diligence – looking for more players that want in.

Crucially, the former electrician has conditional letters of support from lenders UBS, JP Morgan and Barclays. This gives him the cover to look at Whitehaven’s books, along with his banks, while checking for extra interested investors.

According to The Australian Financial Review, Whitehaven chief executive Tony Haggarty says the offer is "reasonable in the circumstances”. That’s a reference to Whitehaven’s share price, which has shed 42.5 per cent in the last three months as coal prices cool.

The newspaper understands that amongst that 48.3 per cent of the register is AMCI, First Reserve, Farallon Capital Partners, Burlingham International and Kouk Group.

While the deal could still fall over on a handful of fronts, the $5.20 figure gives a few analysts and commentators – including this one – a reason to blush.

Exactly a month before Tinkler lobbed this proposal, the Newcastle sporting franchise enthusiast drew widespread scepticism from the market as many expected that anything less than $6 a share, which felt like a stretch, wouldn’t convince the register.

It shows just how much analysts and commentators have been behind in the slump in coal prices. Valuations for Whitehaven have since been slashed and now $5.20 a share is looking mighty fine.

Seven West Media

While some onlookers might have got the Tinkler play wrong, many media analysts can rest assured that they’ve got the Seven West Media debt situation right.

According to The Australian Financial Review, Seven West is tipped to launch a capital raising on July 16 (hang on, that’s today) for $450 million.

The newspaper believes that Goldman Sachs, JP Morgan, UBS and another unnamed bank were structuring the offer, for new boss Don Voelte to announce, at $1.30.

That’s a 10-15 per cent discount on the theoretical ex-rights offer, which is about in the middle of the discount prices that have been offered recently.

In fact the raising might go some way to stopping shorters from targeting Seven with the assumption that the company would be raising equity.

Seven West’s major shareholders, including billionaire Kerry Stokes’ Seven Group Holdings, private equity player Kohlberg Kravis Roberts and Ausbil Dexia are tipped to throw their support behind it, the newspaper reports.

The question is whether Seven will use the cash to insulate itself from what could be a stubborn downturn in the advertising market, or go out on a limb and throw up some kind of rival proposal to News Limited’s $2 billion proposal for Consolidated Media Holdings.

Remember, CMH chairman James Packer said from the beginning that he didn’t believe a transaction would take place until next year. This play has a long way to go.

DuluxGroup, Alesco Corporation

Paints company DuluxGroup has again resisted the temptation to make its $188 million bid for Alesco Corporation final. But it has eased up the conditions.

After getting almost 30 per cent of the register behind its $2 a share offer in the final days leading up to Friday’s deadline, Dulux extended the offer to August 3 from July 20.

It also dropped a few conditions for the garage door maker. The major change is lenders have given their blessing to the Dulux bid achieving a simple majority of 50.1 per cent, rather than 90 per cent.

Alesco has a large retail shareholder base, about 40 per cent. So the target’s board can probably pencil in at least that level of support for its current stance on the $2 proposal as too low.

While dropping the acceptance level to a simple majority helps the dynamics of Dulux, the market consensus still appears to be that the suitor will need the target to engage for a slightly improved offer.

Start countdown to August 3.

Hastings Diversified Utilities Fund, Pipeline Partners Australia, APA Group

The independent directors of Hastings Diversified Utilities Fund (HDF) might have thrown their support behind the $1.3 billion takeover bid by Pipeline Partners Australia; but the picture is getting more complicated, if anything.

The directors have given the tick of approval for the $2.325 cash offer from PPA, a joint venture between HDF’s manager Utilities Trust of Australia and Canada’s Caisse de dpot et placement du Qubec, provided the independent expert Grant Samuel concludes the offer is fair and reasonable and a superior offer isn’t available.

There are two complicated factors. Rival bidder APA Group is set to find out on Thursday what the Australian Competition and Consumer Commission thinks of its offer. If it wins approval there’s a chance its $2.10 offer will be increased.

Additionally, major HDF shareholder Australian Foundation Investment Company has taken issue with the conflict of interest between Utilities Trust’s role as manager, where it collects performance fees, and as bidder.

It also argues that the recommended offer is too low and could have been better handled by the target.

Given the 70 per cent acceptance condition that PPA has placed on its bid, AFIC would prove to be serious obstacle for HDF if others on the register are similarly displeased.

But before all of that, we have to wait for the ACCC.

Australian Securities and Investments Commission

The corporate regulator has confirmed that three proposals have been lodged with Treasury about corporate reform and now it’s up to them as to whether things should proceed.

Australian Securities and Investments Commission chairman Greg Medcraft told ABC TV’s Inside Business program that three proposals have been put up, one of which relates to creep provisions.

"These are matters we've raised with Treasury which we think could be reviewed and would require a change of laws or some modification of laws,” said Medcraft. "It's really up to Treasury then to determine whether it's appropriate to recommend to government."

On top of the creep provisions, Medcraft said the regulator has its eye on disclosure, which at the moment prioritises legal matters over economics interests, along with scheme of arrangements, currently excused from takeover provisions.

Wrapping up

Wealth manager IOOF has won unanimous board approval for its $49 million bid for Plan B.

The 60 cents a share bid is a 33 per cent premium to the previous closing price. Plan B shares responded strongly, rising to 59 cents a pop.

But IOOF might have to convince its own register a bit more, after its own stock slumped 2 per cent to $5.77.

Printing company PMP is understood to still be in talks with apparent former suitor TMA Group.

Two weeks ago PMP announced it had declined further due diligence with TMA on the basis that the approach didn’t have much credibility.

However, The Australian Financial Review understands that PMP isn’t just still discussing the prospect with TMA, but some sources are confident a deal can be done.

As for where paper comes from, the debt of timber company Gunns is understood to be attracting interest from US hedge funds. Again, this is according to the AFR. Gunns has about half a billion dollars in debt to be refinanced by the end of this year.

Meanwhile, Richard Branson’s right-hand man David Baxby says Qantas Airways is a prime candidate for a takeover play from private equity.

According to Fairfax newspapers, Baxby said that, structured in the right way, a bid for Qantas is a "perfect scenario” for private equity.

Two things need to be remembered. Firstly, the Qantas Sales Act is a stubborn political construct to move. Secondly, Baxby’s boss happens to own a sizeable chunk of Qantas’ main domestic competitor, Virgin Australia.

That doesn’t mean that he’s wrong, Breakfast Deals is just sayin’ is all.

And finally, former underworld figure Mick Gatto has reportedly sacked 20 staff from his company Elite Cranes amid fears that it might be placed in administration.

Breakfast Deals would just like to send its regards to whichever administrator picks up that job if it comes to pass.

Mr Gatto: "Is there a problem here?”

Administrator: "Well, yes there is Mr…actually, no there isn’t.”