DataRoom AM: Leighton's super sale

The $1 bn-plus auction race for Leighton subsidiary John Holland remains fierce, while talk of a Glencore-Rio Tinto merger is building.

It’s been a brutal week for Leighton Holdings, but through the gloom there is a glimmer of light as two big contract wins for subsidiary John Holland aid with its $1 billion-plus auction.

Elsewhere, optimistic talk of a merger play between Glencore and Rio Tinto captures attention, Mark Carnegie’s Lonsec Fiscal Group weighs takeover interest and Wesfarmers rejects demerger suggestions.

The ongoing auction of Leighton-owned contractor John Holland has reportedly lost its two early frontrunners in Ferrovial and Bouygues, but fresh interest from China Communications Construction Company indicates a deal could yet go through. Samsung has also been linked to the potential $1bn-plus deal, but it is no longer clear if it’s in the race. The auction is part of a $3bn selloff by Leighton, which also includes its $300 million-plus services assets, where Ferrovial remains the favoured buyer.

It’s not the only news at John Holland as the firm has secured a $650m contract to build and run the Ravenhall Prison in Melbourne, alongside GEO, Honeywell and Capella Capital, and has signed a $3.7bn contract for the North West Rail Link project in Sydney. The latter, which sees John Holland lead a consortium including UGL, Plenary Group and fellow Leighton subsidiary Leighton Contractors, may be worth $2bn to Leighton alone.

Such big contract successes can only aid interest in the John Holland auction.

Meanwhile, there has been plenty of analyst chatter about a possible push from Glencore to merge with Rio Tinto. Bernstein Research analyst Paul Gait is leading the charge, arguing a deal would offer Rio shareholders “the best of both worlds” as it created a diversified giant to rival BHP Billiton. The rumours were seen as one catalyst for Rio’s sharp upward move to start yesterday’s trading session, but the lack of afternoon momentum, and losses in London overnight, suggest a blockbuster deal is far from imminent – and incredibly unlikely.

In finance, the Mark Carnegie-backed Lonsec Fiscal Group has put up the ‘for sale’ sign after an Asian trade buyer made a recent takeover approach, according to The Australian Financial Review. Lonsec is believed to prefer a sale of just 20-40 per cent of its $50-$100m business. Meanwhile, Carnegie is likely to retain much of his 40 per cent stake.

In the IPO market, Australian Careers Network is hoping to raise close to $100m when it lists on the ASX next month. The float of the vocational education provider, which is being run by Petra Capital, may value the firm at $250m.

Wesfarmers, meanwhile, has firmly distanced itself from talk of a demerger, with chief executive Richard Goyder hinting the firm was as comfortable as ever with its structure. A spate of big-name demergers has driven recent interest in the possibility of a Wesfarmers split.

In media, Fairfax Media is reportedly set to claim the 50 per cent of Metro Media Publishing that it does not already own. The speculation of Fairfax’s interest comes three years after it first secured a major stake in the real estate magazine and website group.

Finally, US-based Global Payments has paid $305m to claim control of Australian electronic payments service Ezi Holdings, while IPO candidate Regis Aged Care is likely to price above the mid-point of its indicative range of $3.20 to $3.85 a share amid strong demand from investors.