Breakfast Deals: Track work

An open access Pilbara rail line is unlikely to push past 'concept' phase without more parties involved, while KT Lim confirms he’s looking to bump up his Echo stake.

The prospect of a Pilbara rail line for the little guy remains as possibility, but Aurizon and Atlas Iron made it clear over the weekend they need more partners to make it work. Echo Entertainment will in fact find Genting’s KT Lim climbing up the register if the regulators allow. Meanwhile, Ten Network and Southern Cross Media have extended their regional affiliation, Commonwealth Bank’s property funds management speculation continues unabated and Pacific Retail REIT hopes to carry the IPO torch forward.

Aurizon, Atlas Iron

The chief executives of Aurizon and Atlas Iron sang from the same song sheet over the weekend about the potential for an open access rail line in the Pilbara for smaller operators.

“I emphasise, again, it’s at concept phase and we need to do a good deal more work,” Aurizon boss Lance Hockridge told ABC’s Inside Business. “We're talking to a wide range of people.”

Meanwhile, Atlas boss Ken Brinsden spoke to the same program.

“We’ve made no secret that Atlas is not really in a position to justify rail in its own right ... if a network like Aurizon is going to be able to get up in the Pilbara then there’s no doubt in my mind it needs multiple customers,” said Brinsden.

The two other moving parts of this potential multi-facet infrastructure deal are the plans at Fortescue Metals Group to sell a minority stake in its rail and port assets as some smaller Pilbara operators jostle for access; and, of course, the iron ore price.

Echo Entertainment, Genting

Genting chairman KT Lim has confirmed that he will lift his stake in Echo Entertainment if regulators permit it.

In an interview with Bloomberg, Lim finally cleared the air on his intentions about what he’ll do in relation to Echo, which was recently rebuffed by the New South Wales government for its expansion plans to The Star.

Lim, who is currently prevented from holding more than 10 per cent of Echo, told the newswire he’s “waiting patiently” for word from the regulators.

“My guess is it will go on for a while,” said Lim.

While the Malaysian tycoon would not say how many more shares he’d like to purchase in Echo – the cap would likely rise to 25 per cent – it’s nonetheless a much-need boost for a stock that’s down 12.1 per cent in a single month.

Ten Network, Southern Cross Media

The statement from Ten Network and Southern Cross Media confirming the renewal of their affiliation deal was telling only due to its brevity.

“The agreement is for three years. No other details of the agreement will be released,” said the pair. Beyond the odd word about “constructive discussions” and “stronger collaboration,” that was about it.

It was reported that Ten was pushing for a two-year deal to take into account the possibilities that could open up if the federal government, whichever party is at the head of it after the next election, could eliminate the 75 per cent reach rule.

Southern Cross has secured the Ten signature by increasing the percentage of revenue it sends to Ten as a result of the program’s given to 35 per cent from 29 per cent.

This is just as well, given that Ten will now be providing Southern Cross viewers with Big Bash League matches.

From the outset it looks like a win-win situation after a tense set of negotiations.

Whether or not this takes TV mergers that go against the existing regional affiliate deals off the table is difficult to say definitively. We don’t have the legislation to remove the reach rule on the horizon.

One hopes that the next government, whichever party it is, takes into account the concept of timing if they do decide to get rid of the rule so as it doesn’t unnecessarily disadvantage anyone.

The other moving part in this story is Nine Entertainment, which appears destined to relist on the ASX at some point in the next 18 months.

Commonwealth Bank of Australia, Dexus Property Group

Comments from Dexus Property Group boss Darren Steinberg that the decision to take a 14.9 per cent stake in Commonwealth Property Office Fund was not a prelude to an immediate takeover offer have fallen on very deaf ears.

Speculation has begun that Dexus could mount a bid of more than $1.20 a share, which would value CPA at $3 billion.

All this talk comes on the back of Commonwealth Bank of Australia’s decision to get out of the property funds management business.

But Steinberg’s comments pour a bit of cold water on the prospect of immediate action.

“At this point we have no intention of making a takeover offer for CPA,” Steinberg said last week.

“The model we worked on with Deutsche Bank will allow us to be a long-term shareholder.”

Of course, Steinberg can change his mind at any time. But as yet, Dexus appears to be taking its time.

Whatever the final outcome ends up being, Dexus’ stake does make it more difficult for rival proposals to get up easily.

IPO Watch

The $500 million Pacific Retail REIT is hoping to get a sharemarket float away in September, according to The Australian.

The trust’s director, David Blight, says the company will refocus its efforts on repositioning its portfolio of shopping centres, which is made up of one sub-regional centre purchased from Federation Centres and another four that it’s picking up from CFS Retail Property Trust.

IPO onlookers have been a little nervous after the troubled float of health insurance comparison website iSelect. The stock last traded at $1.58, down from its $1.85 issue price.

Best of luck to Pacific Retail REIT.

Wrapping up

According to The Australian Financial Review, reports that the odds of big private equity firms interested in Optus’ $2 billion satellite business could be lengthening thanks to the strong interest from industry bidders.

Final bids are due on August 6.

Doubt still hang over Woodside Petroleum’s participation in the $US1.25 billion ($1.34 billion) Leviathan project in Israel, which is being held up by debates about export limits.

Project partner Noble Energy flagged a stronger emphasis on domestic supply as the agreements continue to be held up by a high court challenge in Israel.

And finally, Santos boss David Knox did little to diminish speculation that the energy company could be a target to big international players.

But again, the endless speculation around Santos has been mostly hypothetical. There’ve been few firm reports of a board looking seriously at taking out the $13.3 billion company.

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