Breakfast Deals: Train in vain?

Fortescue may be looking to hang onto its infrastructure assets after all, while Australand is no longer up for grabs.

Fortescue Metals Group releases its quarterly production numbers today amid speculation that two would-be bidders for a minority stake in its infrastructure have dropped out. Is the third force in iron ore a greater force to be reckoned with in fiscal-2014?

Meanwhile, CapitaLand has taken its Australand stake off the table, ending a long run of speculation in the process; OZ Minerals waits for word on Rio Tinto’s Northparkes as the mining giant’s Turquoise Hills tries to get its bridging facility sorted; and Equity Trustees has extended its offer for The Trust Company.

Fortescue Metals Group, The Pilbara Infrastructure

Fortescue Metals Group releases its latest quarterly production report this morning. The only way onlookers will care significantly about the actual production figures is if Andrew Forrest’s third force in iron ore produced a larger than expected number of unicorns.

All attention is on whether chief executive Nev Power can tell us something about the attempts to sell a minority stake in its port and rail infrastructure, which is housed in The Pilbara Infrastructure. There’s $3 billion to $4 billion at stake for Fortescue.

With the deadline pushed out to the end of September, and no word leaking out yet on whether a big fish has been landed, investors (and yes, journalists) are getting restless.

According to a steady stream of media reports, haulage company Aurizon and investor Brookfield have dropped out of the race in recent weeks.

What remains unclear is precisely why. A lot has happened since Power put a $3 billion to $4 billion infrastructure stake on the table in December.

First of all, there’s been quite some distance put between Fortescue and what can gently be described as a moment of clarity last year, when the iron ore price dipped to such an extent that Fortescue wasn’t making a profit on its stuff after production costs and debt payments.

Some swift tap-dancing from Forrest and Power secured a large refinancing package from Fortescue’s lenders, which famously gave the iron ore miner the room it needed to settle Leucadia Corporation’s $100 million of unsecured notes.

That event stabilised Fortescue to such a degree that it could arguably be deemed the deal of 2013, even if it was only a refinancing agreement.

But it was with this context that Power launched the company’s infrastructure stake sales. With $10 billion in debt sitting on the balance sheet, it made complete sense.

Since then the iron ore price has stabilised at levels Fortescue would be far more comfortable with and smaller producers like Atlas Iron and Brockman Resources have come knocking with third-party rail access requests.

It’s been clear from the beginning that these requests complicate matters for Forrest and Power. If they were to win access to the infrastructure on not-so-favourable terms for Fortescue, a minority stake in said infrastructure would be less desirable.

As Fortescue prepares to hand down its production report, some believe the iron ore miner could be seriously considering keeping the infrastructure in-house. It would amount to a bet that it can de-risk its balance sheet enough through cost cuts and production.

If that turns out to be the case, then this morning’s production report is, in fact, rather important.

But all this is speculation. Over to you two, Messrs Forrest and Power.

Australand Property Group, CapitaLand, Stockland Group

And with that, the speculation about Australand Property Group comes to an unmistakable halt.

Last night in a statement to the ASX, Australand said that several proposals had been forthcoming since majority shareholder CapitaLand, of Singapore, put its 59 per cent stake up for review.

However, none of the proposals were compelling.

Then to seal it, CapitaLand released its own statement saying that it would maintain its investment in Australand.

At various times GPT Group, Mirvac Group and Stockland Group have been linked to possible deals with Australand. But the fact that CapitaLand appeared to be looking for neat exit and the only firm suitor, GPT, was only interested in the commercial side of the business, meant a deal was always going to be tricky.

Rio Tinto, OZ Minerals, MMG

Rio Tinto’s Turquoise Hill Resources, the entity responsible for the Oyu Tolgoi copper-gold mine, is considering a private placement of common equity as talks continued with the Mongolian government to bed the fabled $US10 billion ($10.9 billion) project down.

Turquoise is looking to repay the non-revolving bridge facility for up to $US225 million, with a maturity date of August 12 looming. It’s also looking at finishing the sale of Altynalmas Gold.

“[Turquoise] is exploring a private placement of common equity securities,” the company confirmed in a statement.

Against this backdrop, Rio is conducting a well-publicised asset sale program that includes then Northparkes copper mine.

OZ Minerals is thought to be front-and-centre for this asset and the company’s share price spiked 8.7 per cent during yesterday’s session amid speculation that Rio should really be close to making a decision on the mine. We’ll see.

And speaking of OZ, former chief executive Andrew Michelmore, now with China’s MMG which took most of OZ’s assets during its near-death experience in 2009, has reminded the market that his company is always on the lookout for compelling acquisitions.

“We’ve got a remit to grow. Acquisition is a part of that,” Michelmore said.

MMG is backed by China’s state-owned entity Minmetals Corporation.

The Trust Company, Equity Trustees

Equity Trustees has extended the its revised takeover offer for fellow financial trustee The Trust Company to the end of September, giving the target more time to assess the bid against Perpetual’s rival bid.

EQT said in a statement to the ASX that Trust’s independent expert Ernst & Young has looked at its improved bid in two meetings. However, Trust hasn’t made up its own mind yet.

The pair is also waiting for the Australian Competition and Consumer Commission to give its thoughts on the prospect of the giant Perpetual taking out Trust. Word is expected at the beginning of August.

So we wait.

Wrapping up

Supermarket giant Woolworths is offloading the fridge manufacturing operations in New South Wales and China of Austral Refridgeration less 10 months after picking up the business from the collapsed Hastie Group, according to The Australian Financial Review.

Speaking of retailers, New York’s Altamont Capital Partners is due to take its initial stake in Billabong International as well as control of the DaKine brand as part of its refinancing package, despite the objections from Oaktree Capital and Centerbridge Partners.

Meanwhile, toy distributor Funtastic is poised to launch a capital raising after going into a trading halt yesterday.

Elsewhere, Origin Energy is expanding its gas exploration interests through a stake in a project of the coast of Darwin.

Origin is taking a 50 per cent interest in an MEO Australia drilling project, covering 80 per cent of the costs capped at $35 million.

And finally, Melbourne property investor Jimmy Goh is poised to make a more than handy profit on a portfolio of development sites in the city’s CBD, according to Fairfax Media.

The newspapers report that Goh is set to sell three properties to two different buyers for a total of $80 million, against the $47 million he paid for them between 2008 and 2012.