BREAKFAST DEALS: Whitehaven restraint

Whitehaven checks its optimism on an Aston Coal tie-up, while Qantas could win in Sydney Airport's restructure.

Demand from China and India for Australian coal does, in some respects, have a limit. While Macarthur Coal and New Hope have found bidders, Whitehaven has been left empty-handed, forced to return to talks with Aston Resources and the savvy dealmaker Nathan Tinkler. Discussions over a ‘merger of equals’ could prove to be the multi-millionaire’s greatest challenge, but already attention is shifting to how Tinkler could use this play to his advantage. Meanwhile, Qantas Airways is reportedly set to get a nice payout from the proposed restructure of Sydney Airports – although higher terminal costs are on the carrier’s horizon. Elsewhere, Rio Tinto has snapped up a greater share of tenements next to Oyu Tolgoi and put another underline beneath Ivanhoe Mines in the process, the ABC has won the Australia Network contract for the government after an embarrassing series of leaks, and Kerry Stokes looks to have finally won over Dale Elphinstone.

Whitehaven Coal, Aston Resources, Nathan Tinkler

It turns out that Whitehaven Coal and Aston Resources are in fact talking about a merger, with neither company appearing destined to be snapped up by a major international player. Both companies said the initial discussions of a "merger of equals” were "incomplete,” while Whitehaven boss Tony Haggarty said there was no guarantee of success. Given that Whitehaven failed earlier this year to find a buyer, his checked optimism is wise.

Mergers of equals can be difficult in the best of circumstances; finding a way for two parties to get what they want from each other simultaneously is more complex than giving a ‘yes or no’ to a bid price. The scenario is made more complicated by the tough figures that adorn the management of Whitehaven and Aston.

Indeed, attention is already shifting to the movements of Aston's chairman – and its largest shareholder, at 38.24 per cent – Nathan Tinkler, and what he might have in mind for a Whitehaven-Aston tie-up. It’s been suggested that Tinkler, who is a canny dealmaker, would not only seek a large stake in the final product but also move to have his privately owned company Boardwalk Resources moved into a Whitehaven-Aston vehicle. In a recent boardroom coup at Aston, Tinkler assumed the chairmanship and brought in Peter Kane from Boardwalk to become the new Aston chief executive.

Elsewhere in coal, The Australian Financial Review reports that the Western Australian government is trying to resolve a battle between supplier Lanco Infratech and Perdaman Chemicals and Fertilisers over the collapse of a 25-year agreement. WA Premier Colin Barnett would do well to tread carefully, given that he copped some criticism for getting involved in the Murchison Metals Oakajee Port & Rail stake sale.

MAp, Qantas Airways, Virgin Blue

If MAp boss Kerrie Mathers is successful in bringing the domestic terminals and international terminals of Sydney Airport under the one roof, the biggest short-term winner could be Qantas Airways. According to Fairfax, Macquarie Equities analyst Ian Myles believes that Qantas could pocket $350 million if a deal is reached with MAp to hand back its existing leases for the current terminal arrangements before they’re set to expire.

While such a deal would likely result in higher fees from Qantas for Sydney Airport services, the proposal to give Qantas and its partners the domestic terminals – while Virgin Australia would get the international arm by 2019 – did get some broadly encouraging tones from the airlines’ respective bosses, Alan Joyce and John Borghetti.

At the moment, it’s just an idea with no feasibility studies or costings done on the MAp side, while Qantas and Virgin haven’t signed anything binding. The move by Mathers is seen as a pre-emptive strike against the growing reality that Sydney needs a second airport – the federal and NSW governments have indicated an airport-rivalling train line down the eastern seaboard could also be on the cards. If the government is going to sap money out of Sydney Airport by emphasising other infrastructure alternatives, MAp has to play its cards now.

Rio Tinto

Rio Tinto has offered its Canadian partner Ivanhoe Mines proof of just how much it likes Mongolia’s copper and gold. Rio has increased its stake in Canadian-listed Mongolian focussed copper and gold miner Entree Gold by exercising pre-emptive rights over $C1.85 million ($1.77 million). Granted, that’s a pittance, particularly for a giant like Rio. But Entree Gold’s tenements sit around the $US10 billion Oyu Tolgoi project in Mongolia and it’s widely expected that Rio will lodge a full takeover bid for Ivanhoe – in which it holds 49 per cent – once arbitration hearings between the two companies ends and restrictions on Rio’s stake expire in the next month or two.

Australian Broadcasting Corporation, Sky News, Australia Network

The federal government has decided to cut its losses and hand a 10-year, $233 million contract for the Asia-Pacific broadcast of the Australian Network to the Australian Broadcasting Corporation. The decision to give the contract to the ABC comes after the government suspended the tender process between the national broadcaster and Sky News, owned by Rupert Murdoch’s News Corp, after a series of leaks threatened to turn the entire process into a farce. The only satisfaction that Murdoch could take away from the outcome is that the episode was highly embarrassing for the government.

Seven Group, National Hire, Kerry Stokes, Dale Elphinstone

Billionaire Kerry Stokes looks to have finally won fellow Caterpillar franchisee National Hire for himself, but he was made to work for it. National Hire’s largest remaining shareholder and Tasmania’s richest man, Dale Elphinstone, has proved to be a thorn in the side of Seven Group Holdings, which put an improved $3.35 cash per share offer on the table for the remaining shares in National Hire, with an extra 40 cents provided Elphinstone said yes. The offer was set to expire last night but The Australian Financial Review said that an hour before the final deadline, Elphinstone is understood to have advised Seven Group of his decision to accept. Now that Elphinstone’s 21.8 per cent stake appears to be in the bag, Seven’s stake in the company will lift above 98 per cent and that makes for the compulsory acquisition of the remaining shares, and the ball game.

ACCC, Foxtel, Austar United Communications

Metcash boss Andrew Reitzer now has absolute confirmation that he won’t have to wind back any sales of Franklins stores after the consumer watchdog said it would not take its objections to the High Court. But Australian Competition and Consumer Commission boss Rod Sims has interestingly left some questions hanging over the proposed merger between Foxtel and Austar United Communications, which was looking more likely to go ahead after the Federal Court’s decision.

The Federal Court berated the consumer watchdog for relying too much on economic theory and not commercial realities. One of the issues was the ACCC’s definition of ‘likely’ when it comes to another set of conditions surrounding a takeover bid – like a rival offer – occurring. ''Although not conclusively determined by the Full Court on this occasion, the ACCC considers that there is strong judicial support for the view that 'likely' means a 'real chance','' Mr Sims said.

Wrapping up

Over at Spotless Group, chairman Peter Smedley is poised to make Pacific Equity Partners sweat a little. The Australian Financial Review reports that Spotless management could take until after Christmas before it delivers the briefing to PEP that was designed to settle an increasingly unruly register, but the private equity players had been hoping for something as early as next week.

The same newspaper believes that Murray Goulburn is considering taking a look at the assets of National Foods. Owned by Japanese giant Kirin, National Foods has complained recently about the effect that the supermarket price war is having on its margins and while it hasn’t said anything concrete about exiting the sector, a healthy offer from Murray Goulburn could do the trick.

Meanwhile, retiring Toll Holdings boss Paul Little doesn’t plan on exiting the M&A game anytime soon. In an interview with The Australian, Little says he’s planning to spend more time building his property group Little Project Developments – which already has more than $1 billion in work underway – and acquisitions are a real possibility.

Elsewhere, Allen & Overy has revealed itself to be the advisory to Morgan Stanley Real Estate Investing in its proposal to acquire Melbourne-based Orchard Capital Investments, the responsible entity for Orchard Funds Management.

And finally, Atlantic has flagged a capital raising of an unspecified amount. Atlantic paid for a near-complete project almost two years ago and needs some extra funds ahead of first production.

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