BREAKFAST DEALS: Total prowl

Australian shale gas players in the Cooper Basin in particular have known for a while that they're well positioned for takeover offers as global energy demand grows for gas. Now, French oil giant Total has unmistakably revealed that it's on the hunt for acquisitions after sealing its 24 per cent partnership in the $US34 billion Ichthys LNG project with Japan's Inpex. The new takeover targets join retailers as the fresh faces taking centre stage in M&A in 2012, with more analysts throwing their weight behind Harvey Norman, David Jones and, to a lesser extent, Myer, as the most desirable after Pacific Brands. Elsewhere, Telstra's $11 billion deal with the government could face further delays with rival Optus raising some last minute concerns with the ACCC; there's an interesting change of tone at a major Spotless Group shareholder, although its position on the Pacific Equity Partners bid has not moved an inch; and Qantas has been urged to bed down an Asian joint venture partner to give investors some certainty.

Total SA

Australian gas companies might want to memorise La Marseillaise, because France's largest oil company, Total SA, is reportedly set to trawl the landscape for acquisitions with little regard for cost. Speaking to The Australian Financial Review, Total senior vice president Jean-Marie Guillermou says there is "no limitation for Total to invest more in Australia”. This emphatic signal comes on the back of the approval of Total's largest investment in Australia as the 24 per cent partner in Inpex's Ichthys LNG project in the Northern Territory, worth a total of $US34 billion.

According to the AFR, Guillermou flagged acquisitions of individual assets, including Cooper Basin shale gas, or full takeovers "if there is a good opportunity”. Companies with assets in the Basin are Santos, Beach Energy, Senex Energy and Icon Energy. Hold on to your berets.

Harvey Norman, David Jones

While the talks between private equity firm Kohlberg Kravis Roberts and battling Australian retail wholesaler Pacific Brands mightn't eventuate into a transaction, the market hasn't missed the underlying point. Australian retailers were frustrated in 2011 by sluggish consumer spending and they've subsequently been thrust into the sights of private equity players trawling for value.

After Pacific Brands, the broadly accepted next players in line are David Jones, Harvey Norman and to a lesser extent Myer. Deutsche Bank analysts have just thrown their weight behind this thesis, according to The Australian. The newspaper cites a report from Deutsche retail analysts Michael Simotas and Paul van Meurs saying that Harvey Norman in particular, with its considerable property portfolio, could be a fruitful avenue for private equity to take in the search for value to unlock.

In the same newspaper, Gerry Harvey's wife and Harvey Norman managing director Katie Page dismissed suggestions that her husband should retire from the chairmanship. Given that Harvey and co-founder Ian Norman cover about 50 per cent of the company, any suitor would have to put a pretty convincing proposal on the table. Harvey isn't exactly known for being a pushover.

M&A in 2012

Australian investment bankers still licking their wounds from a trying 2011 would be well advised to remember some of their international counterparts didn't do so well either. According to global law firm Allen & Overy, the Asia-Pacific region was the "bright spot for global dealmakers”. The shelter that China provides is born out in the data. Australia is China's seventh largest trading partner with China, but it's also the largest recipient of China's outgoing M&A activity.

Allen & Overy corporate partner Aaron Kenavan expects similar themes to define 2012. "Subject to resolution of the situation in Europe, we also expect to see a continuation of the uptick in outbound investment by Australian corporates reflecting their increasing cash reserves and high Australian dollar,” says Kenavan.

Telstra, Optus, NBN Co

Telstra could face yet more delays in the final approval for its $11 billion agreement with the government, with rival Optus reportedly launching some last minute objections to the structural separation agreement. The Australian Competition and Consumer Commission needs to sign off on the deal before Telstra can collect the cash. According to The Australian Financial Review, Optus has raised concerns with the ACCC about the "overarching” commitment from Australia's largest telco to give rivals open access to its network while NBN Co rolls out the network.

Spotless Group, Pacific Equity Partners

The one thing you can't say about proceedings at Spotless Group amid the approach from private equity group Pacific Equity Partners is that things have been dull. Chairman Peter Smedley has now set board recommendation and due diligence at $2.80 a share, or $743 million for the whole company, while PEP is sitting unmoved at $2.63.

Orbis Australia, which has 8.3 per cent of Spotless, has been one of the most outspoken critics of the Spotless board, hoping to bully them into engaging with PEP. The threat of an extraordinary general meeting to spill the board has been looming – calling the meeting requires just 5 per cent, but to spill the board at the meeting you need much more.

Over the weekend Orbis appeared to change its tone. According to The Australian, Orbis analyst Simon Mawhinney made some rather curious comments about how it's "a fact” that the company's stake in Spotless has increased. "There is no publicly available information that will let you know by how much but that is a fact,” Mawhinney told the newspaper. ASX rules state that Orbis is obliged to update the market when its stake increases by more than 1 per cent, but Mawhinney says it hasn't reached that point yet. So what's the big deal?

Qantas Airways

Qantas Airways boss Alan Joyce was given the broad tick of approval by investors for bringing the industrial dispute with unions to a head and pushing for the creation of a joint venture, Asian-based carrier. He's been given the hurry up on the second point.

Qantas has been dithering about whether to establish a base for the new airline in Singapore or Malaysia's Kuala Lumper. By all accounts the airline appears to be leaning towards the latter, but details are still a month away. According to Fairfax, Macquarie Equities believes that the uncertainty surrounding Qantas' strategy "only serve to complicate the investment thesis”.

The scene is further complicated by reports that US Airways Group, Delta Airlines and private equity firm TPG Capital are all circling the bankrupt parent of American Airlines, AMR Corp. American Airlines is the only US carrier in the Oneworld Alliance and Qantas' partner for US connections.

Macquarie Equities has shifted its airline preference to Virgin Australia because it has a "better articulated strategy,” while Goldman Sachs has also lowered Qantas from ‘buy' to ‘hold'. Since the end of November Qantas has underperformed the benchmark index by 5 per cent so Goldman's downgrade could hardly be attributed to a rocketing share price abandoning fundamentals. Joyce has built up a lot of goodwill in the market with his bold strategy to save Qantas from a similar fate to American Airlines, but time is of the essence.

Wrapping up

The Australian-listed African Iron might be in a good position with a $338 million takeover offer from South Africa's Exxaro on the table, which has won unanimous board approval, but there has been a slight hiccup. Late Friday night African Iron had to re-release its target's statement for what appears to be a missing page covering issues like when shareholders will receive consideration for accepting, what happens if the offer lapses and compulsory acquisition. Most of the details are standard procedure, nothing major. Exxaro has put 51 cents a share up for African Iron, a 27.5 per cent premium to the previous trading price. That rises to 57 cents if its gains 75 per cent of the target. In the South African player's sights is the 92 per cent stake in the Mayoko-Lekoumou iron ore project in the Republic of the Congo. The question is whether, with that minimum acceptance condition, Tony Sage's Cape Lambert (with 25.25 per cent) and Equatorial Resources (with just under 20 per cent of the register) will play ball.

Meanwhile, Abacus Property Group and Abacus Storage Fund have lodged an explanatory memorandum with the Australian Securities and Investments Commission detailing a proposed merger of the two funds into one A-REIT. The move was flagged recently during a strategic update of the market.

In resources, Linc Energy shares ended last week on a very positive note, up 17.7 per cent to $1.33 with a big pick up in volume, prompting speculation that the company is getting closer to selling the Teresa coal project in Queensland's Bowen Basin. According to The Australian Financial Review, India's GVK Group is one of a few international players said to be in talks with Linc over Teresa.

And finally, shares in engineering group Forge jumped on Friday with the announcement of a $16 million acquisition of Western Australian contractor CTEC.