DataRoom AM: Rio’s Guinean gain

Rio Tinto edges closer to Simandou pay dirt as it signs a crucial investment framework, while TWE leaves the door open for a sweetened bid from KKR.

Rio Tinto is finally making significant progress in Guinea, but one big challenge remains: financing its mammoth $20 billion project.

Elsewhere, Treasury Wine Estates shuts the door on the takeover offer it received last week, SAI Global receives a $1.1bn offer of its own and Queensland readies for a big influx of casino cash.

There is no doubt Rio Tinto’s Simandou project in Guinea is valuable, but fears over sovereign risk and financing have long cast a dark shadow over the $20bn project. Some of the doubts were erased overnight as the miner signed an investment framework with its JV partners and the Guinean government, but the challenge of financing the mammoth project remains a large one.

With three years of contractual battles behind it, Rio can now press forward more comfortably on the search for financial backers ahead of a planned 2019 production date. The JV partners are already believed to be in “serious talks” with as many as 30 parties over a multi-billion dollar deal, with GE considered to be among the keener observers.

Closer to home, the board of Treasury Wine Estates has indicated talks with suitor Kohlberg Kravis Roberts will only eventuate should the private equity firm return with a sharply improved bid than the $3.05bn offer it put forward last week. In a letter to shareholders, the winemaker’s board said it had no plans for “further action” in relation to the current bid, but would engage with any offer that maximised shareholder value.

The letter was released to the market just after TWE shares closed at a 10-month high. The firm’s stock is now 12 per cent above the initial bid price as very optimistic investors punt on a revised -- or rival -- proposal in the vicinity of $3.5bn.

Also in the sights of private equity is the ASX-listed SAI Global, which received a $1.1bn offer from Pacific Equity Partners yesterday. The suitor’s board has said it is open to engaging on the proposal, though has yet to form a final view on the merits of the deal -- such comments suggest a deal is more likely than not.

The news pushed stock in SAI Global to a two-year high, though the firm’s shares remain just shy of the offer price.

Elsewhere, two Asian-backed consortia have topped rivals to win the right to build two casinos in Queensland. The news will see the building of an $8.15bn casino resort north of Cairns at Yorkeys Knob and the development of a $7.5bn casino on the northern end of the Gold Coast, provided planning and environmental approvals are granted.

The Yorkeys Knob resort is backed by Hong Kong billionaire Tony Fung, while the Gold Coast development will be built by the ASF Consortium, which includes one ASX-listed firm and several Chinese companies.

Quadrant Private Equity remains on the cusp of a $100-$200 million deal to claim aged care operator Padman Health Care, with plans afoot to merge Padman with its own aged care group Estia and float the combined business on the ASX. Given the success of Japara Healthcare, there is every reason to believe that such a listing will be well received by investors.

Also in the IPO market, Monash IVF is hoping to raise as much as $298.4m through an IPO, with the listing valuing the firm as high as $500m. Macquarie Capital and Morgan Stanley are serving as co-lead managers of the float.

In resources, ASX-listed, African-focused gold miner Papillon could finally be set to fall into the hands of a predator. The firm, long discussed as a prime takeover target, entered a trading halt yesterday ahead of a “potential corporate transaction”, with London-listed Randgold near the top of the list of likely suitors.

Finally, Penrice Soda Holdings, which fell into the hands of administrators earlier this year, has received plenty of interest from potential buyers as liquidators look to offload the troubled firm.

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