BREAKFAST DEALS: Out of Africa

Two ASX-listed, African-focused miners are coming under M&A pressure for two distinctly different reasons. The Chinese suitor for Discovery Metals is not-too-subtly talking about withdrawing its offer on the bank of a pit wall failure at the target’s flagship project in Botswana. Meanwhile, Sundance Resources shares have been smashed as its Chinese suitor fights for funds. Elsewhere, everyone’s wondering whether Ten Network’s superstar shareholders will take up their full entitlements, while the Qantas-Emirates alliance has picked up some last-minute government endorsements.

Discovery Metals, Cathay Fortune

Chinese private equity firm Cathay Fortune is turning up the pressure on takeover target Discovery Metals, raising the possibility of withdrawing its $830 million offer.

While CF Investments, a joint bidding vehicle of Cathay and China-Africa Development Fund, extended the $1.70 a share cash offer by a month to January 11, the suitor also said it’s concerned about Monday’s announcement of a pit wall failure at the Discovery's flagship Boseto copper mine in Botswana.

CF Investments said it was "evaluating this important development,” adding that it was "surprised” by what it believes is a lack of detail from Discovery, particularly because the disruption could "breach the ‘no material adverse effect’ condition" of the $830 million offer.

That’s a standard condition of takeover offers, whether this event constitutes a breach isn’t so clear cut.

Discovery revealed on Monday that the Botswana Ministry of Mines, Minerals, Energy and Water Resources told it to stop digging at the Zeta pit mine of the Boseto site following a "minor” pit wall failure.

The African-focused copper said it’s reviewing how this could affect production, but CF isn’t impressed.

The reason for the suitor’s stroppiness could be that Discovery refused to engage with it, despite an arguably compelling offer, preventing CF from conducting due diligence.

This latest threat is a pretty obvious attempt to leverage the problem at Boseto in order to force Discovery to open up its books. We'll have to wait and see if it works, but Discovery was pretty firm when it said no to due diligence at $1.70 a share.

Sundance Resources, China Sichuan Hanlong Mining

Sundance Resources shares were smashed yesterday as scepticism that a $1.4 billion deal with China Sichuan Hanlong Mining can be done came back in spades.

The African-focused iron ore miner’s stock shed 11.5 per cent to finish the session at 34.5 cents each. Once again, Sundance shares are changing hands at a staggering discount to the 45 cents Hanlong offer.

Bizarrely, The Australian Financial Review understands that another "firmly interested party” is conducting due diligence with Sundance right now. It's curious timing to say the least.

Hanlong dropped its offer from 57 cents to 45 cents and with it an exclusivity clause. After all this time, would someone else really take a look at Sundance, the logic went.

For this story to have any legs the apparent rival suitor would have demonstrate solid financing, which has been so sadly lacking in the Hanlong talks that are now a year old.

China Development Bank has lately demanded an assessment of the approvals that Sundance is securing from the governments of Cameroon and Congo before it gives the go-ahead on the majority of the deal’s funding.

The thing that would no doubt frustrate the Sundance register is that the CDB has had no such worries approving the financing for the aforementioned Discovery Metals bid, which is also an African-focused miner.

No one should get ahead of themselves. Sundance has one declared bidder on the table and one bidder only. But this deal’s twists and turns have served up constant reminders that anything really can happen.

Ten Network

Embattled free-to-air broadcaster Ten Network is facing a sombre annual meeting at Sydney’s Wesley Centre today, as shareholders face a second capital raising six months to the day after their last.

Chief executive James Warburton will have to give shareholders good news of some description, having previous indicated that the broadcaster didn’t need fresh equity.

The early indications are that the company’s headliner stakeholders chairman Lachlan Murdoch, gaming billionaire James Packer, mining billionaire Gina Rinehart and WIN Television’s Bruce Gordon will participate in the $224 million offer, revealed yesterday by The Australian Financial Review.

The question on the lips of shareholders is whether the top guns will take up all their entitlements.

Failing to do so won’t just dilute their respective stakes, and with it their influence, but it would reflect poorly on the outlook for a company that’s share price is already down 62 per cent for 2012, with another drop to come on the back of the raising.

The positive is that Warburton will be able to put concerns about the company’s balance sheet to rest and start building the narrative about a recovery.

While we’re discussing media, Fairfax newspapers have an interesting yarn this morning about the sale of Consolidated Media Holdings to News Limited, the owner of this website.

A report says that News will have to foot the bill for a $400 million capital gain racked up by CMH when it was under the control of Packer.

Fairfax says a spokesperson for News explained that the case with the Australian Taxation Office came up during due diligence and News was aware that it was facing a bill of up to $5.2 million between liabilities and interest.

And with Rinehart on our minds, The Australian Financial Review reports that her company Hancock Prospecting is hopeful that it can secure $US4 billion in debt from export credit agencies for the Roy Hill iron ore mine, which could then kick global banks into gear for the next $US3 billion.

Qantas Airways, Emirates

As the consumer watchdog prepares to offer its preliminary findings on the proposed 10-year alliance between Australia’s Qantas Airways and Middle Eastern giant Emirates, the governments of Victoria and Queensland have thrown their support behind the deal.

Victorian Tourism Minister Louise Asher and Queensland Tourism Minister Jann Stuckey both said in submissions to the Australian Competition and Consumer Commission that their governments believe the alliance is in the interest if the industry.

"We believe that cooperative operations between these two organisations will help increase international visitation to Victoria as well as increase international visitation and dispersal for all states and territories,” said Asher.

Stuckey, who describes tourism as one of the "four pillars” of Queensland’s economy, was similarly encouraged by the proposal.

"The proposed coordination agreement between Qantas and Emirates will create a premium are services operation that better connected Australia with Europe,” said Stuckey.

These sentiments contrast with those expressed by former Qantas chief economist Tony Webber less than a week ago.

"The world without the arrangement between Qantas and Emirates will have fewer international seats than the world with it,” wrote Webber.

"Fewer seats means fewer passengers, including inbound tourists. While Qantas will divert some capacity from Europe to Asia as a result of the tie-up, the net impact will be fewer seats entering and leaving the Australian market.”

Wrapping up

Perpetual Investments head of equities Matt Williams has reportedly written to clients to renew his protest at the cross-shareholding arrangements between Washington H Soul Pattinson and Brickworks.

The letter, reported by The Australian Financial Review, comes ahead of the SoulPatts annual meeting on Friday.

On the other side of this cross shareholding arrangement struggle is venture capitalist Mark Carnegie, who’s been loaned some shares in Brickworks by Perpetual to try to apply some pressure.

And something else to keep an eye on is packaging giant Amcor, which left investors in little doubt yesterday in Sydney that mergers and acquisitions are firmly on its agenda as we head into 2013.

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