BREAKFAST DEALS: Fined China

A new report says Australia’s prominence as a destination for Chinese investment is being hijacked by the United States and Canada. The Queensland government has got better bang for its buck with the latest share sale in Aurizon. Meanwhile, Nathan Tinkler has left a Sydney courtroom and the Whitehaven Coal register somewhat bemused, Glencore International is apparently mulling an Australian malt sale and stockpicker John Sevior has reportedly nabbed a big fish.

Australia’s M&A Scoreboard

Australia needs to give Chinese investment players more options to seek out Australian partners to slow the erosion of our strategic M&A position by countries like the United States and Canada, a new report has found.

joint report from KPMG and University of Sydney has found that while Australia continues to enjoy an advantage over developing countries as a destination for investment, when it comes to developed countries the race is tightening.

“The USA and Canada in particular are catching up with Australia,'' said Professor Hans Hendrischke from the University of Sydney China Studies Centre.

“While Australia's accumulated Chinese direct investment is still ahead of its main international competitors, there is no denying that the rest of the world is hot on our heels and aggressively competing for Chinese capital.”

Australia received $US51 billion from China by the end of 2012, according to the report. That’s only just ahead of the US on $US50.7 billion, with Canada racking up $US36.7 billion.

The report says Australia needs to “create a commercial frameworks that help diversify co-operation between Australian and Chinese partners” if our strategic importance is to be maintained. KPMG-University of Sydney also called for a ‘China-capable workforce’.

While this underlines just how much more attention needs to be devoted to the federal government’s white paper on Australia in the Asian Century, rather than what Kevin Rudd said on St Patrick’s Day, it also emphasises just how vulnerable the M&A bulls for 2013 could be.

While the central bank money printing has brought much of the IPO speculation about, the overall state of the deals market compared to past years is still terribly vulnerable to a pullback in Chinese investment.

Aurizon, Queensland government

The Queensland government has halved is stake in coal haulage company Aurizon for the second time in six months, collecting $806 million in the process.

Treasurer Tim Nicholls confirmed over the weekend that the state government sold its stake down to 8.9 per cent from 18.2 per cent at $4.03 a share, with the sale run by UBS.

That’s an 18 per cent premium to the $3.42 a share the government got back in October when it sold down to 18.2 per cent from 34 per cent, picking up a total of $1.5 billion.

Nicholls said the government doesn’t have any near-term intentions to sell down the stake further.

The main difference between the October deal and the latest one is that Aurizon, formerly known as QR National, won’t take place in a share buyback.

Only about $500 million of the stock found its way into the hands of institutional investors last time around because Aurizon stepped in by picking up about $1 billion in stock.

Whitehaven Coal, Nathan Tinkler

Embattled mining magnate Nathan Tinkler served up a bizarre day for his fellow Whitehaven Coal shareholders in the New South Wales Supreme Court on Friday where he admitted what we all know – that he's “asset rich and cash poor at the moment”.

Tinkler was appearing in relation to the failure of his private company Mulsanne Resources to meet a $28.4 million placement in Blackwood Resources.

The former electrician said he was of the understanding that he would secure financing after speaking to Noble Group director Will Randall. However, this was a verbal agreement and there doesn’t appear to be any record of said deal that didn’t end up happening.

Furthermore, Tinkler had a crack at the media for a “vigorous campaign” that has hurt his position – forget the Whitehaven short-sellers.

It’s not as if the media has conjured this one out of thin air. Tinkler’s Patinack Farms, which he claims is worth much more than $100 million, has been under financial duress and forced into stud sales; there have been wind-up threats brought against his NRL and A-League interests; not to mention the sale of his private jet, helicopter, and of course the Mulsanne proceedings.

But most astoundingly, Tinkler claimed that the Tinkler Group Family Trust is worth about $1.4 billion (that figure appeared to vary during the proceedings) against debts of between $500 million and $600 million… and it’s controlled by his wife, Rebecca.

The trust includes the Whitehaven stake, which is worth just $460 million at current prices.

Quite what the Whitehaven register is to make of all of this is beyond this columnist.

Glencore International, Joe White Maltings

The focus on Australian agriculture continues with a report from Bloomberg that Glencore International could be thinking about offloading its Australian malt unit.

The news wire reports that two people “with knowledge of the matter” indicate that the commodity trading giant is mulling a sale of its Joe White Maltings arm, which is the largest malt producer in Australia. Apparently, Glencore is working with Bank of America.

Animal nutrition company Ridley Corp could be interested, according to the sources, not to mention the big brewers Foster’s Group (owned by SABMiller) and Lion Nathan (owned by Kirin Holdings).

Glencore picked up Joe White Maltings through its purchase of Canadian grains handler Viterra, which it completed late last year. Viterra acquired the business when it purchased Australia’s ABB Grain back in 2009.

The report comes amid ongoing speculation about GrainCorp, which has rejected American giant Archer Daniels Midland sitting on its register with 19.9 per cent.

ADM offered $12.20 a share amid reports that the target’s board wanted something north of $13. GrainCorp shares finished trading last week at $12.05.

Wrapping up

Stockpicker extraordinaire John Sevoir has reportedly secured a $100 million mandate from the Myer Family Company for his new project Airlie Funds Management.

According to The Australian Financial Review, the former Perpetual superstar has grabbed the mandate for MF Charities Fund from Maple-Brown Abbott, dumped as manager since 2005.

Speaking of the famous retailer, Myer boss Bernie Brookes expressed in a KGB interview with Business Spectator that he believes there’s little chance the department store will become a takeover target.

And while we’re talking about deals that won’t happen, National Australia Bank boss Cameron Clyne has ruled out a banking acquisition in the UK – hardly surprising given the root-canal reputation it has with investors – along with a firesale of its Clydesdale and Yorkshire Bank assets.

Meanwhile, the Future Fund is expected to be saddled with a $100 million damages case from AustralianSuper over the alleged gaming of its deal with Australian Infrastructure Investment, according to The Australian.

The argument is that AustralianSuper has effectively been locked out of exercising its pre-emptive rights over a 30 per cent stake in Perth airport.

Elsewhere, Brookfield Asset Management will launch a $US900 million ($865 million) Australian property trust next month through a special dividend to shareholders, according to Fairfax.

And finally, Leighton Holdings subsidiary Visionstream has picked up a four-year contract for the fibre rollout of the National Broadband Network from NBN Co worth up to $1 billion. It’s an initial contract of two years worth $334 million for the eastern states, with two potential one-year extensions.

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