BREAKFAST DEALS: Whitehaven returns

Aston Resources and Whitehaven Coal reignite talks, while Rio Tinto pushes for a Canadian uranium mine.

* This column was written prior to Whitehaven Coal's announcement of merger talks with Aston Resources.

The feverish bidding process for Macarthur Coal and New Hope, informed by the narratives of growing energy demand from 2.5 billion people across China and India, belies the reality that they’re very difficult deals to close. The degree of difficulty increases as you go down the pecking order and it appears that Nathan Tinkler’s Aston Resources and former takeover target Whitehaven Coal have restarted talks of a tie-up, which would create a much fatter $4.7 billion target. Meanwhile, as Labor moves a step closer to handing Australian uranium over to India, Rio Tinto is working to convince Canada that it should be allowed to run a uranium mine on Canadian soil. Elsewhere, Nine Entertainment could find itself in the hands of bankers very quickly indeed, Charter Hall Office REIT is expected to reveal a new offer to its shareholders in the next 36 hours, while Macquarie has apparently got the yips over Royal Bank of Scotland’s aviation leasing business.

Aston Resources, Nathan Tinkler, Whitehaven Coal

Nathan Tinkler’s Aston Resources and former takeover target Whitehaven Coal have reportedly rekindled their talks for a $4.7 billion tie-up. Last month Tinkler became chairman of Aston – in which he’s the largest shareholder – under the guise of the company transitioning into a producer. The market didn’t seem to like the news, with the share price tumbling 10 per cent. Now, The Australian Financial Review is reporting that with the assistance of UBS, the $1.9 billion Aston is believed to be talking with the $2.8 billion Whitehaven about a scrip combination.

Given Aston’s share price is down 17 per cent over the last two months, while Whitehaven is down just 0.5 per cent, a scrip deal doesn’t sound very attractive for Tinkler just at the moment. But then again, coal is all the rage right now. Whitehaven itself took a tumble earlier this year when efforts to sell itself, amid all the excitement around Macarthur Coal and New Hope, failed to solidify.

Rio Tinto, Hathor Exploration

Rio Tinto boss Tom Albanese now has to convince the Canadian government that while an Australian company mightn’t be worthy of taking a major Canadian potash producer, it should be allowed to operate its own uranium mine. Speaking to ABC TV's Inside Business over the weekend, Albanese said he believes the Canadian government is "constructive” and a solution could be found to the problem Rio faces; at present, a foreign company cannot own more than 49 per cent of a uranium mine unless it is ultimately controlled by another company or a domestic bidder for the company cannot be found.

These two conditions don’t apply to the $1.2 billion Roughrider project – the jewel of Hathor Exploration, which Rio has won with its $C654 million ($642 million) bid, beating out Canada’s Cameco in the process. The theory that Cameco could ultimately partner with Rio for the project has always lingered due to the restrictions. Relations between Australia and Canada cooled somewhat after BHP Billiton’s bid to acquire PotashCorp was rejected on the grounds of "national interest” just over a year ago, and now the relationship will be tested once again. Rio will no doubt use its existing Canadian footprint – and maybe even the potential of a bid for BHP's diamond operations, which have been put up for review – as grounds that it deserves to be trusted with a uranium mine on its own.


It should be pointed out that Australia’s uranium policy has a long way to go before it’s as liberal as Canada’s. But progress is being made. Australia’s small- to medium-sized uranium players are now a step closer to finding Indian suitors, thanks to Prime Minister Julia Gillard's success over the weekend in guiding the ALP national conference into a change in policy for Indian uranium exports. While Canberra still needs to sign an actual deal with New Delhi, an internal Labor revolt is the biggest threat to a deal (the Coalition broadly supports the move, which means the Greens would have to hold another issue hostage to exert leverage here).

So, let’s backtrack to November 15, when Gillard first announced the change in policy, for the companies the sharemarket deemed to be the major beneficiaries. Peninsula Energy, Bannerman Resources, TUC Resources and Toro Energy all jumped between 10 and 20 per cent as investors considered new takeover possibilities. Paladin Energy and Energy Resources of Australia struggled by comparison, but internal issues explain that.

Nine Entertainment, CVC Asia Pacific

Nine Entertainment’s private equity owners, CVC Asia Pacific, could find themselves without a big media asset quicker than anyone anticipated. CVC Asia Pacific’s Adrian MacKenzie has asked the company’s lenders to cover its $3.7 billion debt burden for refinancing but the newspaper says hedge funds led by Oaktree Capital are unlikely to support the deal at the end of next week and are expected to go for control at Nine. Nine chief executive David Gyngell presides over a suite of attractive assets in troubled times. Meanwhile, Seven West Media billionaire Kerry Stokes has been keen to keep floundering advertising budgets on the front page, increasing pressure on the Seven Network’s chief rival.

Charter Hall Office REIT, Macquarie Group

Charter Hall Office REIT shareholders are expected to get a look at an improved offer from a Macquarie Group-led consortium sometime over the next two days. Last week the company went into a trading halt amid speculation that a revised $1.7 billion bid was on the table. The last offer from the consortium, which includes the Government of Singapore Investment Corporation and Canada’s Public Sector Pension Investment Board, of $2.43 per share has reportedly been increased to between $2.47 and $2.49. It remains to be seen whether chairman Roger Davis, who has overseen two rejections already, will be amenable to the new plan.

Macquarie Group, Mitsubishi, Royal Bank of Scotland

Speaking of Macquarie, the silver donut appears to have gotten cold feet in the race for Royal Bank of Scotland’s aircraft leasing business. According to The Australian Financial Review, Macquarie and its joint bidding partner Mitsubishi decided against putting in a binding proposal to sale advisor Goldman Sachs by the Friday deadline. The newspaper says the pair haven’t formally withdrawn from the process so if the other offers turn out to be a letdown they could be back in the game. That’d take a reversal in expectations, with Japan’s Sumitomo, US banking major Wells Fargo and China Development Bank rounding out the rival bidders.

Cape Lambert

Perth’s Tony Sage mightn’t have to brave the possibility of a hair-raising IPO, with the sale process for Cape Lambert Resources' Marampa iron ore project in Sierra Leone reportedly ticking along nicely. According to The Australian, the Cape Lambert managing director says a data room set up for potential buyers has received some encouraging interest from a number of players, including some from China. You might remember that in July, news broke that Sage was considering a $500 million float of Marampa in London, but since then the markets have deteriorated significantly because of forces not too far away from England’s capital. While Sage says a sale is still a possibility, a sale process at the right price could be executed in the short-term – a float in the current environment takes bravery.

Wrapping up

The consumer watchdog says the issues it has with the agreement between Telstra and NBN Co have "narrowed considerably”, but the nominal December 20 deadline for the deal might have to be pushed back after the telco failed to submit a key document. Telstra boss David Thodey might have to find another reason to celebrate Christmas. Meanwhile, in another long-running saga, Centro has been cleared to perform its $3 billion restructure after the company’s former accountants PricewaterhouseCoopers withdrew their legal threat to block it.

Still in the courtrooms, the NSW Supreme Court has slapped a travel restriction on the wife of former Hanlong executive Hui Xiao after he failed to return to Australia from a visit to China that was supposed to be brief. Xiao has been caught up in an insider trading scandal at Hanlong, which has overshadowed the company’s bids for Australia’s Sundance Resources and Bannerman Resources. And Fairfax reports that ‘entrepreneur’ Nicholas Bolton is still being chased by the Australian Taxation Office through the courts for unpaid taxes on million generated from selling BrisConnections proxy votes.

Meanwhile, The Australian Financial Review reports that the Goldman Sachs-led consortium looking to recapitalise the debt of pub group Redcape Property Fund is trying to get the scheme booklet released to the stock exchange. And finally, Downer EDI has successfully refinanced a $260 million facility covering its underperforming contract to deliver 78 trains for Sydney’s city network.

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