Bankers weigh adviser roles in state asset sales

Both UBS and Morgan Stanley are believed to have opted out of the contest.

It might not be the best time for the government to open the tender process for business advisers to conduct scoping studies into Defence Housing Australia (DHA) and Australian Hearing (AH).

The two-week process, which opened on June 26, falls roughly within the winter school holidays, during which many bankers take days off. Bankers who are interested have to submit their responses by this Thursday. The Department of Finance is seeking one adviser for each scoping study, although advisers can choose to bid for both.

While most of the banks have been expected to bid for a role in the scoping studies, the contest is not as fierce as anticipated, reporting by Data Room has found.

Sources said bankers really need to work out their team structures to decide whether to participate, with multiple state-owned assets up for sale. It makes things even tougher when many bankers are on annual leave during the two weeks.

Both UBS and Morgan Stanley are believed to have opted out. UBS has handled large-scale government assets privatisations such as QR National in Queensland and Telstra at the federal level, and Morgan Stanley has advised the New South Wales government on the sale of Port Kembla and Port Botany.

Citi is believed to be looking at the tender details, but the bank may not have the capacity to handle the process due to its limited team size at the moment. Lazard, which is already working on Medibank, may be too busy to tender for extra privatisation work.

The call for Defence Housing Australia and Australian Hearing scoping studies also closely followed the one from the New South Wales government for the sale of electricity network assets. It is understood that Macquarie, UBS, Goldman Sachs, Morgan Stanley and Lazard did their pitching presentations to the NSW government last week.

Deutsche Bank, Goldman Sachs and Macquarie have already been working as joint lead managers for the upcoming IPO of Medibank, which is kicking off the first-round road show this week.

On the other hand, Defence Housing Australia and Australia Hearing could seem complicated for bankers to sell.  Defence Housing Australia provides housing to defence members and families and also operate a property investment and lease back program, which does not have a comparable business in the market. AH is the biggest provider of government-funded hearing services.

The government will progress these scoping studies “in an orderly and methodical way”, Finance Minister Mathias Cormann previously said in a statement.

The studies for Australian Hearing are expected to be completed by mid-October this year, while Defence Housing Australia studies should be completed by mid-January next year.

(Reporting by maggie.lu@businessspectator.com.au)