Australia set to turn tables on overseas acquisitions

AFTER yielding its biggest brewer, sugar refiner, wheat seller and pulverised coal exporter to foreign acquirers in the past two years, Australia is poised for an increase in takeovers overseas as companies seize on a strong currency, according to Barclays.

AFTER yielding its biggest brewer, sugar refiner, wheat seller and pulverised coal exporter to foreign acquirers in the past two years, Australia is poised for an increase in takeovers overseas as companies seize on a strong currency, according to Barclays.

The value of purchases abroad by Australian companies might match that of inbound deals next year, said Daniel Janes, the head of mergers and acquisitions for Australia at Barclays Capital. That has not happened since 2007.

"The core theme for 2012 is rebalancing," said Mr Janes, whose company helped Canada's Agrium buy local wheat exporter AWB last year. "One of the parts will be Australian champions taking their opportunities on the global stage."

Australia's natural resources, healthcare, consumer and agricultural companies operate in global industries and are encouraged by a favourable exchange rate to scout the world for assets, Mr Janes said. The Australian dollar has gained 54 per cent since October 2008.

"The exchange rate makes it more attractive to buy rather than sell, as long as the sectors are flourishing," said Ron Masulis, a finance professor at the Australian School of Business at the University of New South Wales. "But it's wise for any potential acquirer to be a bit gun-shy, especially as they move further away from their base."

SABMiller, based in London, has bought Foster's Group and St Louis-based Peabody is buying Macarthur Coal.

Those acquisitions were among the $US72 billion ($A70 billion) of inbound purchases announced this year. That's more than double the $28 billion of acquisitions by Australian companies, which included the $US12.1 billion takeover by BHP Billiton of Petrohawk Energy Corp in Houston.

Such "elephant deals" had reinforced confidence in takeovers among Australian boards, Mr Janes said.

The gap between the price companies are seeking for assets and what buyers were prepared to pay narrowed in the second half and more sales were planned for next quarter, Mr Janes said.

The value of takeovers involving Australian companies is $US132 billion so far this year, compared with $US148 billion for all of last year.

Not all Australian companies have enjoyed success overseas. Centro Properties Group this month won approval to convert borrowings into equity after a debt-fuelled $US9 billion US buying spree between 2006 and 2007 backfired.

And Treasury Wine Estates cost Foster's at least $US8 billion to build through acquisitions such as Beringer Wine Estates in 2000. Treasury was spun off in May and now has a market value of $A2.5 billion.

Mr Janes expects private equity firms to buy and sell more assets next year as credit improves. They were likely to target healthcare and consumer-related industries, and those offering services to the mining industry, he said.

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