As the commentariat busily mines for insights into Rio Tinto's diamond review, Matthew Stevens raises a very good question: why now? BHP Billiton has been shopping around similar assets for months and is yet to find a buyer. Could it be that Rio has already received some serious interest? Meanwhile, John Durie and Malcolm Maiden duke it out over whether the government was right to block Huawei from the NBN, and Bryan Frith slams Bank of Queensland's unfair capital raising.
But first, The Australian Financial Review's Matthew Stevens explores the suggestion that Rio Tinto has launched its diamond review in response to approaches from keen buyers:
"One of several potential bidders that have apparently kicked the diamond-studded tyres at Ekati is said to be the Canadian miner and purveyor of fine diamonds, Harry Winston Diamond Corp. Harry Winston is, of course, a 40 per cent partner with Rio in the Diavik operation. Given that interest was financially sustainable, then it would seem to be quite possible that Harry Winston is attempting to engineer some sort of consolidation play in the Canadian diamond space... So who might make a beeline for Argyle? Given the structure of the consumer market, there would seem to be some industrial Indian interest in Argyle. But there is some suggestion, too, that Gina Rinehart might like the look of the numbers and the product."
At The Australian, John Durie takes aim at Huawei conspiracy theorists, who he says are pushing a damaging narrative about Chinese companies threatening Australian interests.
"In fact, Huawei was beaten easily by Alcatel in the first round on price and service: a simple commercial decision. NBN Co officials have not visited Huawei facilities in Shenzhen as claimed and Telstra has no significant contract with the company as claimed in some reports. Sometimes it seems Chinese companies miss out on deals because the other side was better: but that then is twisted to satisfy other agendas."
However, Fairfax's Malcolm Maiden says the government was right to err on the side of caution given Huawei's government ties.
"There is no doubt that corporate and government interests intermingle in China, and Huawei's private ownership does not materially alter that fact. The group is becoming more transparent as it grows, but its ownership and management structures are still opaque by Western standards, making matters such as chairwoman Sun Yafang's past role as an executive in China's top security agency, the Ministry of State Security, difficult to assess. It also operates within a very tightly regulated industry that is nominated as strategic by the Chinese government. One question is whether China's government-business governance amalgam creates concerns in a strategically sensitive industry such as telecommunications if China is also an aggressive user of the internet for intelligence gathering. It's difficult to argue that it does not: China has turned surveillance into an art form."
Meanwhile, The Australian's Bryan Frith says Bank of Queensland's equity raising will be highly dilutive and inequitable, and lists a number of capital options he says would be more favourable for existing shareholders. He takes particular offence at the bank paying dividends on placement shares.
"Looked at another way, it's tantamount to issuing the placement shares at only $5.79 a share – and that would represent a discount of 20.7 per cent to the previous closing share price and a discount of 18 per cent to TERP (theoretical ex rights price). The interim dividend will require $80 million, of which $6.45 million will go to the fortunate institutions that participate in the placement. That means BOQ will raise $450 million only to immediately return $80 million to the shareholders."
In The Age, Eric Johnston says the fact that the Australian Prudential Regulation Authority is allowing BOQ to pay a dividend shows that the regulator is not too concerned about the bank's loss. And The Australian's Tim Boreham runs the ruler over another equity raising, at Beach Energy, encouraging shareholders to take part.
In other corporate commentary, The Australian Financial Review's Chanticleer columnist, Michael Smith, wonders if Leighton's warning about its Brisbane Airport Link could be less a reflection on the project itself, and more on the Australian Securities and Investments Commission’s recent heavy-handed tactics, as The Australian's Barry Fitzgerald argues that Altura Mining's share price is yet to reflect its new coal ambitions.
And finally, The Australian Financial Review's Alan Mitchell says Tony Abbott, as prime minister, may be forced to sell an emissions trading scheme to the Australian electorate, following new ETS rumblings around the world.
THE DISTILLERY: Rio's reasons
A jotter asks whether Rio has already got a buyer for its diamond assets, while others debate the wisdom on the Huawei ban.
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