BREAKFAST DEALS: Woolies sale

At a time when conservatism in business abounds, Woolworths is going for much higher leverage as it expands supermarkets and takes on Bunnings and Harvey Norman in hardware and appliances. Fresh from raising $700 million in an oversubscribed high interest rate hybrid borrowing, Woolies is now looking to sell its big property portfolio. And in a further property sell-out, Orchard Funds Management, which has assembled $1.2 billion in properties, might have seen hard signs ahead and has now entered into exclusive talks to sell – reportedly with Morgan Stanley. Meanwhile, a Russian nickel giant has BHP Billiton in mind for a joint venture, the FIRB says Arrow will have to wait before it can get its hands on Bow Energy and Carsguide.com.au has brought 35 dealer groups into the fold with a 50 per cent equity stake.

Woolworths, Orchard Funds Management, Morgan Stanley

Woolworths sparked excitement in investment banking circles with news that it's considering a spin-off for its property portfolio, with $8.6 billion on the books. Translating the book value to the trust value doesn't work – as current valuations will demonstrate – but the prospect is nonetheless enticing. Chief financial officer Tom Pockett effectively listed the options that consultants will be asked to consider. "You can sell the portfolio, you can sell single stores or you can sell groups of stores, or you can package a whole group together, such as the Masters businesses, and list to a whole lot of private investors or public investors," Pockett said.

Meanwhile, Melbourne-based Orchard Funds Management is in exclusive talks for a proposed takeover of its $1.2 billion property business, reportedly with a major US bank. Orchard put a notice on its website late last night indicating that it hopes to seek shareholder approval for a deal sometime before Christmas. "During exclusivity, the party will be conducting due diligence and negotiating transaction documents. The transaction is still preliminary and non-binding in nature and at this stage there is no certainty that it will be completed.” According to The Australian, the unnamed party is US banking giant Morgan Stanley. A play on Orchard would mark a return to the Australian market for Morgan Stanley after the company took Investa Property Group for $4.7 billion before the global financial crisis.

Woolworths, Dick Smith Electronics

Turning back to Woolworths for a moment, and new boss Grant O'Brien faces a big problem when his strategic review winds up in the new year – who would buy the retail giant's struggling Dick Smith Electronics chain? O'Brien spoke of selling the business or closing it down and was careful not to outwardly favour either option, nor even reveal the name of the consultant brought on board for fear of implying what their preference might be.

When it comes to consumer electronics, JB Hi-Fi has been king and its famous focus – and success – on organic growth probably excludes it as a willing buyer. Woolworths' main rival Wesfarmers is said to have looked over The Good Guys business, but price became an issue. Blackstone Capital has also been tied to the group. But The Good Guys is a very different vehicle and Dick Smith Electronics doesn't look that enticing in its current form.

Allphones, ANZ Banking Group

ANZ Banking Group has reportedly booked a win by securing a mandate to sell Allphones, Australia's largest independent telecommunications retailer. The Australian Financial Review reports that the sale of the parent company AMT Group could generate $100 million. The sale rekindles memories of mobile retailer Crazy Johns when Patricia Ilhan, wife of the late John Ilhan, sold the family's 75 per cent interest in the company to Vodafone in a deal that valued the business at $150 million. Vodafone is likely to show some interest here as well, along with Optus parent company SingTel and Telstra. The newspaper says the auction has entered the second round and it's hoped that advisers will be able to finalise the deal by the end of the year.

Meanwhile, over at ANZ's rival Westpac Banking Group, an unquantified but no doubt large IT outsourcing deal has been done. Now that St George is firmly in Westpac's tent, chief executive Gail Kelly has pulled the trigger on phase two of its cost reduction program with the outsourcing of the bank's software development and maintenance to IBM and three Indian companies – Infosys, Tata Consultancy and Wipro.

BHP Billiton

A Russian executive from resource major Norilsk Nickel has raised the prospect of a joint venture with Australian mining giant BHP Billiton. According to media reports, Norilsk scientific development boss Vladimir Dyachenko nominated BHP as a potential joint venture partner for its operations in Western Australia. "If management finds it reasonable to create a joint venture … it could be in nickel production," Dyachenko said, who added that their respective assets are close to each other. Norilsk operates three mines in Western Australia, with two other projects on the go.

Bow Energy, Arrow Energy

The Australian Foreign Investment Review Board almost sent fears through the market once again that China is viewed with suspicion with a delay to the approval of Arrow Energy's $535 million takeover of coal-seam-gas developer Bow Energy. FIRB has delayed the decision by up to 90 days and given that most deals are normally approved within 30 days, Arrow's 50 per cent ownership by PetroChina (Royal Dutch Shell owns the other 50 per cent) immediately comes to mind given the handful of Chinese takeovers that have been knocked back in recent history. But Arrow maintains that the delay is just 'procedural,' made to allow the Australian Competition and Consumer Commission time to complete its own review of the deal, which is due on November 24. It would also be unusual to allow PetroChina's joint $3.5 billion bid for Arrow through, only to block a subsequent $535 million bid.

Dulux Group

Australian paint company Dulux Group has joined forces with a Hong Kong group to expand its footprint in China. Dulux has merged its Chinese operations with Camelpaint through a new company called DGL Camel International in which it will hold a 51 per cent stake. The merger appears to be pretty equal, with Dulux saying that a payment to Camelpaint to secure board representation and control of the group was made to the Hong Kong company, but it was "not material to the Dulux Group as a whole”.

News Limited, Carsguide.com.au, Fairfax Media

News Limited is taking the fight up to Carsales.com.au, with a deal between its auto-advertising site Carsguide.com.au and 35 of Australia's top car dealer groups that will give the dealers a 50 per cent stake in the business. This will bring 660 local dealerships under the one tent. The strength of chief rival Carsales.com.au isn't just its ability to get buyers in touch with dealers, but to get buyers in touch with private sellers. Still, Carsguide.com.au chief executive Michael Schreck said the move will provide greater competition and a better offering for consumers.

Meanwhile, over at rival Fairfax Media, the Australian Financial Review reports strong interest for the float of New Zealand auction and classifieds business Trade Me and that more shares could be up for grabs if the offer is oversubscribed. The newspaper says First NZ Capital, Craigs Investment Partners, Goldman Sachs and Forsyth Barr are co-lead managers.

Wrapping up

On a day where property has taken centre stage, Commonwealth Property Office Fund is planning a share buyback of between $50 million and $100 million after a string of asset sales. Meanwhile, Stockland collected $170 million from the sale of its interest in a Martin Place property that houses Seven Network's new headquarters to QIC Global.

Marketing services company Photon Group may finally settle its debts with asset sales. The Australian understands that Photon is set to sign a deal to sell its field marketing arm to Southeast Asian private equity firm Navis Capital Partners for $146.5 million.

Meanwhile, the Australian Financial Review reports rumours that China's Bright Foods is in talks to grab an Australian wine group and given its near-explicit interest in Treasury Wine Estates, this could be a space to watch. The same newspaper reports that Gunns is thought to be talking to two European investors about its pulp mill. But considering the upheaval in European markets and the time it has taken Gunns to get anywhere on this project, those who don't hold their breath should be forgiven.