It’s a bumper edition this morning. Malcolm Turnull’s name is all over the latest discussion about Chinese investment in Australia, whether agricultural or telecommunication assets. ACP Magazines is away, but the future of Nine Entertainment is still up in the air. Meanwhile, Nathan Tinkler has another court battle on his hands, Gunns Limited is gone, Leighton Holdings has announced up to $2.5 billion in potential deals, while Newcrest and Suncorp are raising capital.
Huawei, Van Diemen’s Land Company, Malcolm Turnbull, John Brumby
If it weren’t for the insights into the Australian Labor Party splashed across the national newspapers courtesy of Lindsay Tanner this morning, Chinese investment would probably be front and centre.
That’s because former Coalition leader Malcolm Turnbull delivered an incisive analysis yesterday of Australia's hesitance to accept Chinese direct investment, particularly for agricultural assets, while adding that such investment is essential.
The comments come as China Investment Corporation looks at acquiring Australia’s largest dairy operations, Van Diemen’s Land Company, and after Treasurer Wayne Swan approved the acquisition of the Cubbie Station cotton farm by Sino-Japanese company Shandong Ruyi Scientific & Technological Group.
"Australian agriculture will benefit from increased investment – for decades, it has suffered from a lack of investment,” Turnbull said to the Sydney China Business Forum.
"The rise of Asia offers new markets and we will need to scale up to take advantage of them. Some of the most productive agricultural businesses in Australia are owned by foreign companies and this has been so for a very long time”
Turnbull went on to address one-by-one the concerns of ‘agricultural protectionists,’ namely that China might push up the price of land, render Australian unable to feed itself by shipping all our locally produced food offshore and/or sell the produce at a price too low to incur income tax.
The shadow communications minister also tried to attach some context to Australia’s suspicion of state-owned foreign enterprises, something outlined by his leader Tony Abbott, as one of the poster-childs of that suspicion announced an intention to launch on the ASX.
"The close links between Chinese companies and the government be they overtly publicly owned or privately owned, like Huawei, creates anxiety in the countries in which they seek to invest,” said Turnbull.
"These concerns, expressed recently in Australia, should not be regarded either here or in China as being any way anti-Chinese let alone, as some people have suggested, racist.”
While addressing the same forum, former Victorian premier and now Huawei Australia director John Brumby said the Chinese telco that’s been banned from participating in the construction of the national broadband network could list on the ASX within the next decade.
"I think in ten years time we look towards a local float of the business,” he said.
"That would do much to dispel the concerns that could remain about China, about Huawei and give Australians the chance to invest in one of the world's largest telecommunications companies.”
Nine Entertainment, CVC Asia Pacific, Goldman Sachs, Apollo Global Management, Oaktree Capital
Nine Entertainment and Goldman Sachs look to have secured the approval of lenders for the sale of ACP Magazines to Germany’s Bauer for $525 million.
The news is more of a formality than anything else, but it’s all the progress that appears to have been made in the discussions with main lenders Apollo Global Management and Oaktree Capital to deciding the future of the television network.
Negotiations between the two sides have been taking place in Sydney over the past two days. The ACP sale is crucial because it lowers the amount of senior debt hanging over Nine from around $2.8 billion to $2.2 billion, giving owner CVC Asia Pacific and Goldman Sachs a sniff at getting a stake in the final ownership restructure.
All that hinges on whether the two sides can come up with a mutual valuation for the company. Nothing has emerged on what came of questions put to Nine about unsuccessful attempts to sell the company earlier this year.
One source that spoke to The Australian summed the situation up beautifully.
"It's never a waste of time getting people together, but I wouldn't expect any quick resolution,” a source close to the talks said, according to the newspaper.
"This kind of thing normally takes as long as you've got, and then a bit more.”
Nathan Tinkler, Whitehaven Coal, Blackwood Corporation
Coal junior Blackwood Corporation is trying to force the hand of embattled mining tycoon Nathan Tinkler.
Blackwood has asked the NSW Supreme Court to appoint a liquidator to Tinkler’s private investment vehicle Mulsanne Resources to recover $28.4 million that he owes them over a 33.85 per cent placement.
For the record, Tinkler has never even hinted that he’s not good for it, but has requested more time to settle the placement.
What’s been widely suspected is that Tinkler has a cashflow problem and that he may be forced to sell down part of his $630 million stake in Whitehaven Coal to pay his bills.
Tinkler, who now resides in Singapore, has already found himself in court over the $17 million bill with Mirvac via his construction company Buildev Group. And of course there’s the apparent problems with his horse racing and breeding business Patinack Farm, purchased for a total of $300 million and unsuccessfully shopped around for $200 million.
After spending six months suspended from trading, Australia’s most famous timber company Gunns Limited has finally exhausted the patience of its lenders.
Administrators are being called in amid expectations that lenders are unlikely to receive much more than 50 cents in the dollar.
As Business Spectator’s Stephen Bartholomeusz explains Gunns has fallen thanks to "years of attrition” following its unsuccessful attempts to get its $2.3 billion Bell Bay pulp mill project off the ground. This morning’s edition of The Distillery is packed with detailed analysis about the company’s collapse. No need repeating it here.
The basic thing you need to know is Gunns owes its banks $526 million and ANZ Banking Group is responsible for about half that.
Some readers might remember that ANZ was once in line to fund the controversial project straight up, but pulled out of the deal despite having a relationship with Gunns 15 years in the making.
In a little piece of Business Spectator history, it was this website that first revealed ANZ was looking at dumping the proposal way back in May 2008.
It was one of the first proper scoops the then fledgling business news and analysis website had put to its name.
The terrific young journalist behind it was Madeleine Heffernan, who’s now with Fairfax newspapers.
Leighton Holdings, Fortescue Metals Group
A debate is breaking out over whether Leighton Holdings is being compelled to sell its profitable telecommunications assets to satisfy the short-term needs of major shareholder Hochtief and Spain’s ACS.
In a statement to the market, Leighton says it will look at selling off the Nextgen Networks, Metronode and Infoplex subsidiaries following a strategic review. Some estimate the assets could raise up to $1 billion.
The construction giant has retained Macquarie Capital for any process that develops.
As explained in this morning’s edition of The Distillery, Fairfax’s Adele Ferguson says the decision "speaks volumes about the changed dynamics between the company, its major shareholder Hochtief and Spain's ACS, which now calls the shots.”
However, The Australian’s John Durie reports that Leighton rejects the notion that its Spanish parent company is pushing the sale.
It was a very big day for the company, with Leighton also winning a $US1.5 billion contract to manage the Firetail iron ore deposit owned by Fortescue Metals Group.
Newcrest Mining, Suncorp Group
It was a case of more capital raisings yesterday from two headliners – miner Newcrest Mining and lender Suncorp Group.
Starting with the biggest, Newcrest is going with a $US1 billion convertible bonds issue in the US, with the proceeds tipped to go towards paying down short-term debt.
The offering is $US750 million in senior unsecured notes falling due on October 22 with a coupon of 4.2 per cent, along with $US250 million of 30-year notes with a 5.75 per cent coupon.
Newcrest has come under pressure recently for its disappointing production report, weighed down by the Lihir gold mine in Papua New Guinea.
Meanwhile, Suncorp has revealed a $350 million capital raising via a convertible preference share issue. Those funds will go towards general corporate purposes and capital management.
UBS has been called in to be structural adviser and joint lead manager. ANZ Securities, National Australia Bank and RBS Morgans and Westpac Institutional Bank are also serving as joint lead managers.
News that China Development Bank has inked the financing for the China Sichuan Hanlong Group takeover of Sundance Resources wouldn’t normally appear in the Breakfast Deals wrap up. But it’s a busy morning.
The Australian Financial Review understands that the letter on the $1.4 billion deal still needs to be rewriter to satisfy the Sundance lawyers. But the mood is becoming far more positive.
Meanwhile, APA Group has relaxed the terms of its offer for Hastings Diversified Utilities Fund. The gas pipeline operator says it will drop the 70 per cent minimum acceptances requirement once its reaches 50 per cent ownership. Expect acceptances to start flowing in more freely.
In retail, the AFR has received word that Woolworths is close to sealing a deal for Dick Smith Electronics, with the final price tag expected to come in at a paltry $10 million to $50 million.
Elsewhere, as we wait for details about precisely what Malaysian gaming tycoon KT Lim is up to via his Genting company empire, Echo Entertainment chairman John O’Neill has lost one of his supporters from the board.
It’s been announced that investment banker Brett Paton is standing down as a director of Echo as Lim and Australian gaming billionaire James Packer jostle for a larger slice of the casino company.
And finally, Virgin Australia has applied to the International Air Services Commission for an extension to its codesharing deal with Singapore Airlines to cover flights to New Zealand.