China is hoping to avoid price gouging in the uranium sector – at least the kind which it believes BHP Billiton and Rio Tinto engaged in with iron ore. And just two days after China’s cabinet approved a plan to reduce carbon intensity in 2015 by 17 per cent from 2005 levels, the Chinese settled on a bid price for UK-based Kalahari Resources, which is the majority shareholder in Perth-based uranium explorer Extract Resources. Nuclear power is a vital component in China’s carbon plans and BHP has the world's largest uranium deposit, Olympic Dam. Rio Tinto understands China’s thirst for uranium and is knee-deep in a battle against Canada’s Cameco for Hathor Exploration, not to mention its stakes in Kalahari and Extract. Rare-earths miner Lynas Corporation could see its plans for Malawi blow up after a High Court decision to snatch its Kangankunde tenements away. Meanwhile, the Fairfax family sought out an old foe to take its remaining stake in the media company before selling out to the market, James Packer looks destined for a showdown with Echo Entertainment over its poison pill protection and Brambles is getting interest from private equity and strategic investors for its Recall document management business.
Extract Resources, Kalahari Minerals, China Guangdong Nuclear Power Corp
Perth-based uranium explorer Extract Resources appears to be in play now that its major shareholder Kalahari Minerals has a price from its suitor. Last night the UK-based Kalahari announced that it was in discussions with China Guangdong Nuclear Power Corp over a 243.55 pence ($3.78) a share offer. A little bit of heat has come out of Guangdong, with this bid 7 per cent lower than the offer from May and 16 per cent off the bid put before the Japanese nuclear disaster. But it still translates to an offer of around $8.86 for Extract if, as expected, Guangdong complies with ASX rules and lobs a bid for the Australian-listed company.
Extract has applied to the Australian Securities and Investments Commission for a ruling on the situation and it's still waiting for an answer. Moreover, given that the offer is slightly lower, it’ll be interesting to see how Canada’s Cameco interprets the valuations as it tries to beat Rio Tinto in the race for Hathor Exploration. Rio, which also owns stakes in Kalahari and Extract, is in the lead with a $C520 million ($489 million) offer for Hathor and Cameco has extended its inferior offer while it considers its options. Cameco doesn’t have the muscle to match Rio, but it’ll no doubt be running the Kalahari numbers as speculation increases that it’ll try to partner with the Australian mining giant.
Still in mining, and Lynas Corp’s ambitions in Malawi appear to have been blown wide open after the country’s High Court blocked the transfer of tenements to the rare earths miner entirely. Instead, they will be returned to South African geologist Michael Saner, who controlled the exploration licence for the Kangankunde eight years ago. Lynas claims the tenements are merely "in dispute”.
The Fairfax family has ended the relationship with the company that bears its name for good. John B Fairfax’s Marinya Media has offloaded its 9.7 per cent stake in the company for around $190 million, with Goldman Sachs conducting the book-build. The value of the stake is a far cry from the $1.1 billion it was worth when the Fairfaxes came back into the fold through the Fairfax merger with Rural Press. John B Fairfax stepped down from the board late last year and it’s expected that his son Nicholas Fairfax will now do the same.
The massive gap in valuations sparked speculation that the family is under financial strain, but there are widespread reports citing sources that this is not the case. The Australian Financial Review reports that both John B Fairfax and his son were at the Intercontinental Hotel in Sydney last night celebrating the closing chapter of the family’s 160-year association with the company – hardly a sign of austerity.
Since the global financial crisis and the rapid decline of Fairfax shares, tensions have frequently emerged between the Fairfaxes and the rest of the board, which reached a peak during the ultimately successful campaign to oust then-chairman Ron Walker. In a twist of fate, two media reports indicate that Walker is understood to have been approached by Marinya to take the 9.7 per cent stake, but he declined.
Meanwhile, Fairfax’s decision not to sell its metropolitan radio assets to John Singleton’s Macquarie Radio Network looks to have helped cull the company’s Melbourne ambitions with its struggling station MTR facing closure. Macquarie Radio’s joint venture partner Pacific Star Network lost a court bid to prevent the streaming of content from Sydney. According to The Age, and underlining the main problem with MTR, the judge presiding over the case had to ask if the station was an AM or FM operation.
Crown, Echo Entertainment
Billionaire James Packer looks pretty keen to increase his interest in rival casino operator Echo Entertainment, but not before some jostling with the company’s management. Packer, through his casino business Crown, is prevented from taking a stake in Echo larger than 10 per cent. According to media reports, close Packer confidant Guy Jalland questioned Echo management yesterday about whether this subject had been broached with the governments of Queensland and NSW. Chairman John Story indicated that, at the time the company was spun-off from Tabcorp in June, both governments wanted the ownership caps and if that changes it’s "not of our making”.
Since its float, Echo's share price has tracked the ASX 200 very closely, but Packer is hinting quite strongly that if the ownership caps were to be removed, a takeover premium could creep in. Merrill Lynch has suggested Crown could pay up to $3.6 billion for Echo, which owns Sydney’s Star City casino, although that was before the share price slump.
The world’s largest pallet supplier Brambles looks set to gain about $2 billion from the sale of its Recall document management business. Brambles announced its intention to sell the unit in August following a strong showing of interest and chairman Graham Kraehe says many of those players, including strategic investors and private equity, are still inquiring. Earlier this year, New Zealand’s Freightways was also named in connection with the Recall business and the AFR suggests that Iron Mountain, Crown and Cintas are odds-on to have a look. UBS and Bank of America Merrill Lynch have been brought on board to handle the sale.
Bank of Tokyo-Mitsubishi, Royal Bank of Scotland
Royal Bank of Scotland has sold its public-private partnership business in Australia to Bank of Tokyo-Mitsubishi. Whispers have been emerging recently about the potential of Japanese banks targeting Australian financials and this could be one of the first deals. Under the terms of the deal the Japanese will get all the division’s current business and deals they have in the pipeline, while The Australian believes that around 20 of the arm’s current crop of 30 bankers will also make the switch. The newspaper also understands that Bank of Tokyo-Mitsubishi wants to increase its project financing in Australia.
Telstra has become the latest big Australian player to connect with the bond markets, completing a €750 million ($1 billion) raising, with chief financial officer John Stanhope saying demand was strong. Staying in Europe, Westfield Group has agreed to offload its 75 per cent stake in Britain’s Boardmarsh shopping centre to Capital Shopping Centres for $86 million.
Back in Australia, QR National boss Lance Hockridge says the rail operator is in very early discussions with smaller miners in the Pilbara who don’t have access to the infrastructure of BHP Billiton, Rio Tinto and Fortescue, over a potential rail network.
Meanwhile, the AFR reports that coal technology group White Energy’s joint venture with Indonesia’s Bayan Resources is looking shaky, with the Australian company suffering an $80 million hit over the coal upgrading plant. The same newspaper reports conclusions from Merrill Lynch analysts, who claim Karoon Gas is well positioned to receive an offer for its Poseidon project, probably from Woodside Petroleum that has nearby assets in the Browse Basin.
Staying with minerals companies and Sandfire Resources says it has drawn down nearly half of its $390 million loan facility to get things going at its Degrussa copper-gold project in Western Australia, while its bankers at ANZ Banking Group have started the process of syndicating the loan.
Finally, the appointment of a Wah Nam Internationl executive to the Brockman Resources board probably puts speculation that it’s planning a surprise exit from the company to bed. However, The Australian’s Bryan Frith notes that the timing of Wah Nam’s renewed talks comes just after the date before which it has to offer something higher than its original $220 million offer.