BREAKFAST DEALS: Rio’s IPO sparkle

Rio Tinto is reportedly preparing the rod for a float for its diamond business after failing to get a bidder on the line. Nine Entertainment has held on to the cricket, but Ten Network has secured the Big Bash League. Meanwhile, Transpacific Industries is thinking asset sales and Mirvac Group’s advisers could be having another look at Australand. 

Rio Tinto

For well over a year Rio Tinto has been trying to find a way to get rid of its diamond business. The big miner is starting to think that it’ll go to market.

According to Bloomberg, sources indicate that Rio Tinto has hired Morgan Stanley to dust off the plans for an IPO for its diamond business, which is the world’s largest supplier of natural coloured diamonds. It could be worth $2.2 billion, according to Deutsche Bank.

This is of course in sync with rival BHP Billiton, which offloaded its 80 per cent stake in the Ekati mine in Northwest Canada to Harry Winston for $US500 million.

Rio has also been looking for buyers for its diamond business, but found no such luck. There have been whispers from the odd private equity firm have expressed interest in the business. In fact there was even speculation that Kohlberg Kravis Roberts could buy both BHP Billiton’s and Rio Tinto’s diamond assets.

Unfortunately, nothing for Rio has materialised.

The Bloomberg report also indicates that the IPO would be for the London Stock Exchange, with no sign of a duel-listing.

While that would be disappointing for Australian investors, focussing on London makes sense. Rio is a London-based miner, despite Gina Rinehart’s calls for new boss Sam Walsh to move the headquarters to the metropolis that is Perth. While Rio is heavily weighted towards iron ore and its Pilbara operations are integral to that, London brings it much closer to some big institutional shareholders, where its diamond IPO makes most sense.

Meanwhile, The Australian reports that Rio is still shopping around $10 billion worth of assets and is picking up interest from Glencore, private equity finds and some big Indian companies.

Nine Entertainment, Cricket Australia, iSelect

Cricket Australia is expected to announce this morning that it has struck a $550 million deal with the networks that everyone should be happy with.

As incumbent broadcaster, Nine Entertainment has exercised its ‘last rights’ and is expected to win the ‘old contract’ for $450 million, which includes test cricket, one-day cricket and some 20/20 rubbish.

Ten is getting the Big Bash League for a cool $100 million. This is the most coin that Cricket Australia has banked from a broadcast rights deal – records seem to be standard nowadays for sports broadcasting deals.

Apparently Nine left it until the last hour – literally – to exercise its last rights for the $450 million bid that Ten had put forward.

But Cricket Australia and Nine appear to have come to a peace agreement of sorts. The cricket administrators were frustrated that Nine was of the opinion that included in its ‘last rights’ were the BBL games, which were not in existence when the previous agreement was struck.

Put it down to Ten’s aggressive bidding strategy or Nine’s generous spirit, but the BBL broadcasting will be covered by Ten and that has resulted in more money going to Cricket Australia.

BBL games have been slated for January/February next year, which will pit Ten with cricket against Seven Network with Tennis.

This brings into serious question whether Ten would, or even could, bid for the broadcasting rights for the Australian Open down the track.

Ten boss Hamish McLennan has reportedly expressed an interest in broadcasting the tennis, but with the BBL in hand it would be almost impossible to juggle both.

Yes, with the advent of extra digital channels – gifted to all the networks by the federal government – gives them more space to broadcast. But the idea of promoting two competing sporting events at the same time doesn’t make any sense. It would also stretch their on-air talent.

Additionally, there would be jostling over which event would get top billing on the network’s main channel. Tennis Australia would demand that the Australian Open gets top treatment because tennis isn’t on Aussie TV for very long each year.

Tennis is much better suited at Seven. Then again, with the BBL at Ten and test cricket wrapping up in very early January, Nine isn’t doing anything that time of year.

Transpacific Industries

Transpacific Industries has flagged possible asset sales or even closure of underperforming operations after revealing an earnings downgrade and the departure of its CEO.

The operators of Cleanaway rubbish collection and recycling kept things vague in regards to what assets will be offloaded, so it’s difficult to speculate on what opportunities could be out there for suitors.

But it does mark an unfortunate negative turn of luck for Transpacific, which was just starting to find its feet.

Chief executive Kevin Campbell is leaving the company after forecasting yearly earnings of $415 million, well short of the $440.2 million posted last year. Brokers had been expecting underlying profits to come in at around $74 million, but Transpacific is expecting something between $60 million and $74 million.

Campbell’s family lives in Melbourne and Transpacific’s base in Queensland was a bit of a stretch, which is understandable.

But the stock dived 12 per cent yesterday and shareholders re-evaluated Transpacific’s immediate future.

Company founder Terry Peabody sold his remaining 11 per cent stake in Transpacific in early March when the stock was 17 per cent higher than yesterday’s closing price.

The ructions between Transpacfic and Peabody were seen as less consequential with the share price having rallied 40 per cent in the previous four and a half months.

Now it appears Transpacific’s lucky streak has well and truly come to an end.

Wrapping up

The advisers to Mirvac Property Group are believed to have taken another look at a merger proposal for Australand Property Group, according to The Australian Financial Review.

The news comes after Australand’s primary suitor GPT Group pulled its tilt at the company’s commercial and industrial business.

Australand’s majority shareholder Capitaland, of Singapore, still wants to get out and a merger proposal would be pretty difficult.