BREAKFAST DEALS: Track work

Aurizon is in talks on a stake sale in its rail business, while the window for an AustralianSuper court case against the Future Fund is narrowing.

Aurizon has put a minority stake sale in its rail network on the table, creating an even more interesting dynamic with iron ore miner Fortescue Metals Group. Australian Infrastructure Fund is paying its shareholders on time, leaving AustralianSuper with less time to give the lawyers a green light. Elsewhere, PrimeAg’s wind-down efforts could have stalled for a moment, developer Peet all but has CIC Australia wrapped up and Stockland could be the next big property player in the deals news.

Aurizon, Fortescue Metals Group

Coal haulage company Aurizon has put itself in the same boat as iron ore giant Fortescue Metals Group by opening talks for a sale of a minority stake in its rail track business.

The company once known as QR National can expect the same sort of interested bidders in the stake, probably something in the order of 25 per cent.

Fortescue is looking to offload a stake in its port and rail assets, housed in The Pilbara Infrastructure, in an effort to raise up to $3 billion. Sovereign wealth funds, particularly the Canadian big boys, are expected to be the strongest contenders.

It turns out in fact that Aurizon has been conducting these talks ‘on and off’ since February.

Aurizon boss Lance Hockridge wouldn’t rule out the prospect of using some of the proceeds to help buy out the Queensland government from its remaining position of 8.9 per cent.

The company is also looking at raising billions in debt, which could also be used to buy out the Sunshine State and take some downward pressure on the share price. However, ‘downward pressure’ is a relative term in this instance, given Aurizon’s near-40 per cent surge in the last 10 months.

There are two interesting interactions between Aurizon and Fortescue outside Aurizon’s sale process.

The first is last week’s report that Aurizon was in talks to purchase a stake in Fortescue’s infrastructure. Diversification might be ideal, but given the possible $3 billion price tag and Aurizon’s other options, like buying out its former government-owner and conducting a general share buyback, it’s unlikely to have the most compelling bid.

The second is the growing expectation that Fortescue will do a haulage deal with mid-tier operator Atlas Iron, putting a big bullet in a proposal to build a rail line for independent operators in the Pilbara.

Aurizon is the haulage company attached to the viability study for that project.

Australian Infrastructure Fund, Future Fund, AustralianSuper

If the stopwatch on AustralianSuper to decide whether or not to take the Future Fund to court over its Australian Infrastructure Fund deal wasn’t ticking at the end of last week, it is now.

AIF announced that it would return some $1.98 billion to shareholders by early July, which is on time.

That’s at the lower end of the company’s distribution range. But given the concerns about the superannuation giant taking bidder the Future Fund to court over alleged ‘gaming’ of the bid for the portfolio, the shareholders will be happy with the cash.

AIF is hanging on to $12 million for associated costs as the fund is wound down.

In the meantime, it doesn’t take a genius to realise that once the funds are distributed to shareholders it will become much harder for the Future Fund to launch legal proceedings to get some of it back.

So if those guys want it, they’d better hop to it.

PrimeAg

Listed agribusiness PrimeAg has hit a snag in its wind-down efforts after agreeing to sell about 60 per cent of its land and water portfolio to US asset management TIAA-CREF Global Agriculture.

PrimeAg managed to sell the TIAA-CREF assets a premium to book value, but informed shareholders yesterday that its efforts to offload its remaining land and water assets weren’t going to well.

The company said the offers received so far have been “materially” below book value, which raises the obvious question – foreshadowed by PrimeAg itself during its half-yearly results – that it might have to offload each asset one-by-one, operating them until such time.

It’s not a great time to be a listed Australian agribusiness player… unless you’re GrainCorp.

Peet, CIC Australia

Listed property developer Peet is making sound progress towards wrapping up CIC Australia for $76 million.

In a notice to CIC shareholders yesterday where certain conditions were waived, Peet said that it has received acceptances of 77.96 per cent.

Most of the conditions waived relate to issues that couldn’t possibly occur now that Peet has such a stranglehold on the company. We’re talking things like unexpected distributions to shareholders to acquisitions that haven’t been flagged.

The one condition that does stand out relates to “material adverse change”. This means Peet is confident enough to say that is has enough confidence in CIC’s books and operations. One would hope so though; it owns more than three-quarters of the company.

Wrapping up

Nine Entertainment might be able to funnel some extra dosh into its Cricket Australia broadcasting rights bid, which is getting some serious attention from Ten Network, from its anticipated exit from iSelect.

Nine’s digital entertainment arm, Mi9, could pick up as much as $153 million from its 30 per cent stake in the soon-to-be-floated insurance comparison site, with The Australian Financial Review of the understanding that it won’t be keeping the stake.

Staying with the letter ‘M’, M2 Telecommunications announced that it will move to compulsory acquisition of the remaining shares in Eftel Limited after securing 98 per cent of the register.

And finally, keep an eye on deals from Stockland in the wake of the first strategy update from new boss Mark Steinert.

The Stockland chief executive announced that he plans to boost the value of the group’s shopping centres, warehouses and business park assets by up to $2.88 billion in five years.

That sort of value creation doesn’t come from patiently waiting for asset appreciation and Steinert flagged proposals similar to those being utilised by Westfield Group and Mirvac Group, where stakes in shopping centres are offloaded and deployed into higher growth asset classes.