The simplest way of isolating which Australian companies might be the subjects of international interest in 2012 is to figure out the question: what do countries need and do we have any of it?
The needs for China and India – and indeed developing Asian countries more broadly – are well known. The latest International Energy Outlook from the US Energy Information Administration illustrates just how much demand for coal and uranium is exploding. This graph shows how demand from non-OECD Asian nations is driving essentially all the growth in coal consumption.
Demand like that attracts takeovers.
But what’s left in Australia for suitors in China and India? Peabody Energy has picked up Macarthur Coal and the bidders are more or less settled for New Hope Coal – many of which are widely thought to be from China and India. Even Gloucester Coal, which had shopped itself around from time to time, has landed a lucky fish in the form of Yancoal Australia, looking for a backdoor listing.
There appears to be a certain size threshold required to get foreign bidders seriously interested in Australian coal assets and it looks like Whitehaven Coal and Aston Resources are about to qualify with their $5.1 billion merger, which will include Nathan Tinkler’s Boardwalk Resources and there’s a good chance that Coalworks will be brought into the mix. Once the merger goes through, expect whispers of Chinese and Indian players to be having a look.
Uranium tells the same story of energy growth, with the added incentive of lower emissions. Another graph from the EIA report demonstrates again that uranium demand is increasing at a rate of knots. Just look at the increase in uranium capacity between 2008 and 2035 for China.
This is already producing results in M&A. China Guangdong Nuclear Corp’s bid for UK-based company Kalahari Minerals is a clear play for the target’s main asset, a 43 per cent stake in Australia’s Extract Resources, which owns the Husab uranium deposit in Namibia, thought to be the fourth largest in the world. Meanwhile, Rio Tinto has secured Canada’s Hathor Exploration, which is sitting on the world-class Roughrider project.
The difference, however, is that in Australia, BHP Billiton is already sitting on our prized uranium asset at the Olympic Dam and two of our established producers, Paladin Energy and Energy Resources of Australia, have their issues. Additionally, the market is well catered for, which is reflected in the price of uranium. This means that international players will tend to go for the top-tier assets.
That being said, the market has identified some players that could benefit from the decision to allow uranium exports to India. Peninsula Energy, Bannerman Resources, TUC Resources and Toro Energy surged between 10 per cent and 20 per cent on Julia Gillard’s policy shift.
Agricultural commodities are just as sought after by China, and Asia in general. Just look at sugar. Already we’ve seen Singapore’s Wilmar International take CSR’s Sucrogen and Proserpine Sugar Mill, China Oil and Food Corporation pick up Tully Sugar, and Thailand’s Mitr Phol acquire Maryborough Sugar Factory. The last significant co-operative player left standing is Mackay Sugar and given that COFCO missed out on Proserpine, expect rumours of the Chinese having a look at Mackay.
It’s not just confined to sugar either. ABB is now in the hands of Canada’s Viterra and it’s expected by many that someone will have a go at GrainCorp.
And it’s probably worth reflecting on the most talked about local takeover of 2011 to figure out what might happen in 2012. We’re talking of course about Foster’s Group. Now that SABMiller has won Australia’s last major brewer – and Lion Nathan is in the hands of Japan’s Kirin Holdings – what happens to the next drinks company in line, Coca-Cola Amatil? The beverage maker’s famous US parent company does hold a 30 per cent stake in the Australian operation but it has made it clear that it would be interested in an offer if the price were right.
Finally, we should remember that Australia has a handful of enticing infrastructure companies and the big sovereign wealth funds have been on the hunt for exactly that. Think Transurban.