insto - Australian financial markets

Australian M&A for the 2009/10 financial year totaled A$124.3 billion, more than double that of the previous year largely due to the

Gindalbie Metals has announced plans to tap the market for up to $206 million to fund its iron ore joint venture at Karara in Western Australia. The company says it has launched two offerings and a conditional placement to its joint venture partner, Chinese company AnSteel. The announcement comes after Gindalbie announced an increased capital cost for Karara, up 20 percent on previous forecasts to $1.98 billion. The joint venture partners are currently securing a $1.3 billion project loan facility from the Bank of China and the China Development Bank.

China ranked the number two investor in Australia in value terms in the fiscal year ended June 30, 2009, up from sixth a year earlier, Patrick Colmer, general manager of Australia's Foreign Investment Review Board, told a Senate estimates hearing.

The M&A register includes deals that were proposed but not completed, such as a since-abandoned US$19 billion deal by Aluminum Corp. of China Ltd. to take a stake in Anglo-Australian miner Rio Tinto Ltd. In the current year, that ranking has likely slipped to fifth, Colmer said.

The team of analysts at mergermarket track private equity news and moves across the Australian market. What follows is a summary of the most significant new PE moves, along with updates on deals that have already been reported.

New situations

• Rio Tinto trying to sell Alcan Engineered Products: Rio Tinto is believed to be in exclusive talks with private-equity house Apollo for the sale of its Alcan Engineered Products division. A report cited persons familiar with the matter as saying that the exclusivity agreement was signed a few weeks ago. The reports cite a labour union member confirming that Rio Tinto was in exclusive talks with a potential buyer.

IG Markets had this to say on some of the higher profile resources and metals players after the close of business on Friday 20 November:

There has been some talk recently about the iron ore joint venture with Rio Tinto and BHP Billiton. JPMorgan believes the estimate of $10 billion worth of synergies from the joint venture looks conservative, with the figure possible as high as US$13.9 billion. JPMorgan estimates the pretax synergies would be more than US$1 billion per year by the fifth year and could be as high as US$2 billion if you factor in the companies’ expansion plans.

The mining and energy sectors figured prominently in the second quarter’s major M&A deals, fired up by offshore investors, explains mergermarket’s Louise Weihart.

Volumes for mergers and acquisitions remained a far cry from their earlier heights, but there were some small signs of recovery in the Australian M&A market in the second quarter of 2009.

Deal values were up by some 83 per cent to reach A$15.85bn, compared with A$8.66bn in Q1 2009, the lowest total deal value in four years.

US stocks gained further ground overnight after Goldman Sachs reported strong second quarter profits.

The S&P500 stock index climbed 0.53 per cent to 905.83.

In London mid-week, Rio Tinto received acceptances for almost 97 per cent of the 523 million shares offered, raising around US15bn (A$19bn) in one of the largest rights issues ever undertaken by any company. Within a day, Rio had received acceptances for almost 95 per cent of the 150 million shares offered to Australian investors in its 21 for 40 rights issue, raising another $4bn or so towards closing the $38bn hole in its balance sheet.

The new shares will commence normal trading on the Australian Securities Exchange on 10 July. After a brief trading halt on Friday 3 July, the underwriters Credit Suisse, JP Morgan and Macquarie announced they had “procured” purchasers for around 8 million Australian shares that had remained unsold in the Australian offer. Similarly, the UK underwriters announced the unsold shares from their part of the rights issue had been taken up.
 

An improving global outlook seems to have has given the Australian mining industry the confidence to try to brush off the embrace of Chinese government backed companies in favour of major local shareholders, reports Bernard Kellerman.

As Australia entered a long weekend, a series of emerging deals shook up the top end of our mining industry.

Is rolling-up the welcome mat to potential investors with significant China Government backing really in our best national interests? asks Mark Story.