BREAKFAST DEALS: Woolies' glass half-full

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Woolworths is aiming to beef up its alcoholic beverages business, and is said to have its eye on the country's biggest ready-to-drink maker, Independent Liquor Group.

Woolworths, Independent Liquor Group

Never far from the front line, Woolworths is rumoured to be looking at a new supplier for its beer business. After moving into the hardware market with its acquisition of Danks Holdings in August last year, the supermarket-chain giant is aiming to beef up its private-label beer business – and is said to have its eye on the country's biggest ready-to-drink maker, Independent Liquor Group, Fairfax reports. The move would see Woolworths come against current suppliers Foster's Group and Lion Nathan, and reduce its reliance on the liquor majors. The paper reports the retailer has done a cost-benefit analysis of Independent Liquor from a number of strategic positions – outright or partial acquisition or an alliance. The business is currently owned by private equity firms Pacific Equity Partners (PEP) and Unitas who bought it for much more than the $700 million it is reported to be worth today. This report follows rumours last month that Woolworths was conducting due diligence on debt-laden listed pub operator National Leisure & Gaming. Tatts Group and Tabcorp – who face the upcoming loss of their gaming duopoly in Victoria – are the most likely to oppose Woolworths here. However, Wesfarmers may also be looking at its presence in the industry, as it tries to muscle up in all areas Woolworths is trying to take a hold of – especially once the competition to Bunnings in the hardware division kicks into gear.

Qantas, AirAsia, Tiger Airways

Qantas' budget offshoot airline Jetstar announced its cost-cutting agreement with AirAsia yesterday, marking the company's territory in South-East Asia. The alliance is expected to bring up to $300 million in annual cost savings – though AirAsia chief Tony Fernandes gave Bloomberg a figure of $200 million – and offers opportunities for joint procurement and for jointly proposing specifications for a new generation of narrow body aircraft. The airlines, reports The Australian, pledged to pump much of the savings into reduced fares – though this is also dependent on fuel costs. Although most see the move as positive, The AFR reports the tie-up could be seen as a failure by Jetstar to go at its Asian expansion plan alone. And, The SMH reports industry insiders as doubting the influence the two airlines could have over Boeing and Airbus – seeing it more as a ploy to disrupt the IPO of Singapore's budget carrier Tiger Airways. On Tiger, Fernandes told The AFR the airline must have been on drugs when it decided to set up a domestic airline in Australia. But, it hasn't deterred the carrier from plans to raise up to $S273 million ($A214.2 million) in a public offering this month, though its announcement yesterday was downsized from an earlier estimate of around $A350 million. According to a term sheet seen by Reuters, Tiger is planning to sell around 165 million shares – or about 30 per cent of its enlarged share capital – at an indicative price of $S1.35 to $S1.65 a share. This vales the shares at 11.4 to 13.9 times forecast 2011 earnings – moving Standard & Poor's airline analyst Shukor Yusof to tell Reuters it looks expensive, given that AirAsia is trading at about seven times PE.

Yanzhou Coal, Felix Resources, Griffin Coal, Wesfarmers

The $3.4 billion buyout by Chinese firm Yanzhou Coal of Felix Resources was the biggest by a Chinese firm in Australian mining history – and now the company says it is looking for more coal acquisitions in Australia as China's demand for the fuel soars. As Yanzhou looks for good local buys, Reuters reports the company has agreed to float 30 per cent of the merged Australian business by 2012. This satisfies conditions set for the miner by the Foreign Investment Review Board. Yanzhou chair, Wang Xin, seems unconcerned though, saying the relisting was in line with its expansion strategy anyway, as the company wants Australian shareholders to help fund growth. A planned acquisition strategy seems natural, and is highlighted by figures quoted yesterday by the federal Minister for Resources and Energy, Martin Ferguson, that China's imports of thermal and coking coal rose by 115 per cent and 385 per cent respectively last year, reports The SMH. Keeping with coal, and The Australian reports collapsed coal miner Griffin Coal bought coal from rival Wesfarmers last year in order to satisfy a supply contract with WA government utility Verve Energy. Sources told the paper at one stage all of the coal Ric Stowe's company was supplying was being bought from Wesfarmers' Premier Coal. Though the parties involved wouldn't confirm any details, industry insiders said Griffin struggled to easily transfer operations from one mine to another and it was hurt by dewatering costs. Griffin went into administration on Monday after it defaulted on $US475 million in payments to US bondholders. So far it remains a mystery as to how the business got itself into $700 million in debt strife – while others in the industry have seemed to prosper. The West reports veteran WA deal-maker John Poynton, who runs Azure Capital, is a key player in the future of the miner, and has talked up the prospect of merging assets with Wesfarmers and possibly offering these in a new float.

Glencore International AG, BHP Billiton, Rio Tinto, Xstrata

Commodity trader Glencore International AG, which is currently considering an IPO, has been talked up by investor and Atticus Capital co-chair Nathaniel Rothschild, Bloomberg reports. Rothschild said if Glencore was to go public, merge with Xstrata – which it has a 35 per cent stake in – or make another acquisition it would "join the ranks of the Rios, the BHPs”. Though London analyst Charles Kernot said the company's focus on mining and metals trading and marketing will mean it is viewed differently from the two majors. Bloomberg says Glencore's bonds give it a pre-conversion value of $US35 billion ($A38 billion), while BHP Billiton's market capitalisation is $227 billion and Rio Tinto is valued at $141 billion. In other BHP news, The Age reports the miner has won its court case against the group of farmers, Caroona Coal Action Group, attempting to stop it from exploring for coal in north-west NSW for environmental reasons. BHP bought the licence to explore for $100 million in 2006.

Wrapping up

An announcement by the end of the week is expected by Mineral Resources in its bid for Polaris Metals. Mineral has effectively won the battle against Lion Diversified for the company, but The AFR reports it still needs Lion's stake to move from a 70.4 per cent share holding to the compulsorily acquisition threshold of 90 per cent. Lion wants more cash – and the paper says speculation is for about a half a cent rise to get the Malaysian steel company to cross the floor. Westpac Banking Corporation is reported to have started marketing a sale of Samurai bonds, a banker has told Bloomberg. The bank is said to be planning to price five-year and seven-year fixed-rate bonds. A document filed with Japan's finance ministry shows Citigroup Global Markets Japan, Daiwa Securities Capital Markets Co and Mizuho Securities Co will help in the non-government-guaranteed sale. Staying in Japan, and Sumitomo Mitsui Financial Group (SMFG) confirmed reports it would raise up to $US9.7 billion in a share sale to help overseas expansion, strengthen its business in Asia and the wholesale operations of its brokerage arm, Nikko Cordial Securities, according to Reuters. The UK's Financial Times is reporting that Goldman Sachs is looking to sever its ties with SMFG after a 24-year relationship. It says Goldman will convert $US1.1 billion of preferred shares into SMFG common shares over the year, though insiders told the paper the bank's relationship with the Japanese lender would remain intact. Overnight, Kraft said it had a 1.52 per cent take-up from Cadbury shareholders for its hostile £10.5 billion bid, with the offer remaining open until February 2. There is a January 19 deadline for Kraft to raise its bid, however, so most investors will be waiting until that passes to do so, Reuters notes. Finally, The AFR reports changes proposed by the federal government mean shareholders in companies involved in mergers and acquisitions will be able to defer capital gains tax liability to when the shares are sold.

Madeleine Heffernan is on leave, returning January 11.