BREAKFAST DEALS: Twiggy canvass

Takeovers are on the backburner as Andrew 'Twiggy' Forrest focuses Fortescue on iron ore, while Ridley Corporate looks set to swoop on Ingham assets.

Fortescue Metals Group simply won’t be stopped in its quest to reach next year’s production targets. But now it has to go hunting for more funds in debt markets. Elsewhere, there’s another potential winner that’s been identified in the Ingham Enterprise sale. Meanwhile, the board ClearView Wealth Management has unanimously told Crescent Capital Partners to do better and Bank of Queensland has offloaded some troublesome loans, but can’t catch a break from the ratings agencies.

Fortescue Metals Group

News that Andrew Forrest’s Fortescue Metals Group might have to raise another $1 billion probably puts a bullet in any bid for Flinders Mines and Atlas Iron for the time being.

Both companies have been touted as potential takeover targets for Fortescue in recent times, but the funding pressures associated with Forrest’s relentless push to 155 million tonnes of annual production by June next year takes clear priority.

Breakfast Deals just wants to emphasise that Fortescue has never made any real signs that it would ever bid for either of these two.

Fortescue said yesterday that it might end up tapping debt markets – not an opportune time, it must be said – thanks to a 19 per cent cost blow out, totalling $600 million, at its Solomon hub site.

The question is how will Fortescue raise the money?

Just last month, Fortescue secured $US490 million ($479 million) in corporate senior debt facilities supported by European Export Credit Agencies.

And in March, Fortescue received a huge amount of interest for its $US2 billion bond sale. After originally seeking a simple $US1 billion, the offer was five times over-subscribed and the iron ore miner doubled the raising.

Perhaps they should be buying some tickets to New York.

Ingham Enterprises, Ridley Corporate

Australian stock feed company Ridley Corporate has been named as a potential beneficiary of the $1.5 billion sale of poultry giant Ingham Enterprises.

It’s entirely likely that a private equity player picks up Ingham. In this case, The Australian Financial Review suggests that Ingham’s chook feedmills would be retained, as the buyer will need to keep feeding the chickens.

However, there are some additional feed assets that don’t feed the chooks, such as a dairy feed site in New Zealand and a horse feed company called Mitavite.

The newspaper says Ridley is tipped to bid for the peripheral feed assets if they come up.

Meanwhile, Fairfax reports that the Investec-led sales process won’t include the Ingham family’s property portfolio.

According to the report, the last time the assets were mortgaged in 2008 by ANZ Bank, the company was in possession of 49 blocks of land worth $358 million.

ClearView Wealth Management, Crescent Capital Partners

The board of mid-sized life insurer ClearView Wealth Management has unanimously rejected the $200 million takeover bid from CCP Bid Co.

CCP, a subsidiary of Crescent Capital Partners, looked up against it from the get-go after major ClearView shareholder Guinness Peat Group announced it was likely to hold out for something better.

GPG owns almost 50 per cent of the target so what it says goes.

The ClearView board is still advising shareholders to take no action on the 50 cents a share offer, saying that it’s "opportunistic and the timing seems designed to take advantage of uncertain and volatile investment markets”.

The market is anticipating a better offer from CCP, with the share price trading at an 8 per cent premium to the offer at 54 cents.

And ClearView might have a point. The company’s share price has consistently traded around the 45 cent mark over the past six months, meaning that CCP’s premium is very skinny by any measure.

In its opening statement, CCP said it offers shareholders an out from a stock that trades on very low volume – unsurprisingly when there’s almost a majority shareholder.

But nothing changes the fact that GPG will decide when this company goes.

Bank of Queensland, Goldman Sachs

Three weeks after receiving an initial proposal from investment bank Goldman Sachs for some of its most value-diminished commercial property loans, Bank of Queensland has done a deal with the investment bank giant.

In a statement to the market yesterday, BOQ said it has agreed to a revised proposal for three problem commercial property loans, along with a small commercial property exposure, for a face value of $156 million.

The deal removes a crucial uncertainty about the bank and the share price jumped 2.4 per cent to $6.81.

But it wasn’t a day devoid of bad news.

Moody’s Investor Services downgraded BOQ’s rating one notch to Baa1 from A3, a move managing director Stuart Grimshaw described as "disappointing".

The ratings agency didn’t have a problem with the Goldman deal, instead it’s concerned about the poor state of the Queensland economy and the sluggish property market.

It’s the third credit rating downgrade that BOQ has been hit with since December.

ANZ Bank

ANZ Bank chief executive Mike Smith has taken an important symbolic step towards making his super-regional bank strategy a reality.

The Melbourne-based bank announced yesterday that it is expanding into the China market, with plans to open a sub-branch in Guangzhou. This site will be run alongside the bank’s existing seven operations in China.

Smith hopes to have 20 branches open in China within the next five to 10 years, the question is how he manages to secure them.

In a statement yesterday, ANZ China chief executive Charles Li said the new branch will be focusing on deposits, mortgages and international banking.

Smith’s strategy isn’t solely focused on China by any means, but securing a strong foothold in the world’s emerging economic superpower would be a real help.

DuluxGroup, Alesco Corportaion

Paints company DuluxGroup will have to increase its $188 million offer for garage door maker Alesco Corporation if it wants to win the target over.

That’s the opinion of The Australian’s Bryan Frith, who’s an enormously experienced business journalist and perhaps the best mind in the Australian media when it comes to M&A.

Frith wasn’t particularly impressed with Dulux’s resistance to increasing its offer last week, where it instead extended the deadline and dropped a few conditions.

"It smacked of a tactic to try to reinforce the impression that Dulux won't budge on price and convince target holders that it is time they accepted,” writes Frith.

"The company has previously stated that the offer is ‘not a must do’ and suggested it is prepared to retain its existing 19.96 per cent holding rather than pay more than Alesco is worth.

"If so, it hasn't worked, as Dulux is yet to report any further acceptances.”

The next deadline is August 3.

Wrapping up

Seven West Media has received a strong show of support from institutions for its $440 million capital raising. Its banks – Commonwealth Bank of Australia, Goldman Sachs, JP Morgan and UBS – filled 92 per cent of the book.

Meanwhile, The Australian understands that Seven West Media billionaire Kerry Stokes is not planning on selling his stake in Telstra Corporation, after reports bank UBS went fishing for a sale.

The same newspaper reports that Macquarie Capital has picked up a minority stake in Berlin’s online meal delivery company, by jumping on a found of financing.

In mining, African Petroleum has given the green light to a non-binding proposal that could at some stage bring in PetroChina as an investor on some of its exploration sites.

And finally Ambre Energy, a Queensland coal mining company, is being taken to court by its US partner Cloud Peak Energy over allegations that it’s mishandling a mine in Montana.

Cloud is trying to get Ambre removed as manager, while Ambre is looking to raise as much as $200 million in an ASX listing.

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