Breakfast Deals: Clipped wings

AustralianSuper is reportedly, and somewhat unsurprisingly, interested in Sydney Airports but not at current prices. Meanwhile, Etihad Airways is showing no signs of stopping after becoming Virgin Australia’s third largest shareholder, Pepper Australia is peppering rival RHG bidder Resimac and Australia’s IPO industry is seriously primed for a long-awaited comeback.

AustralianSuper, Kuwait Investment Authority, Sydney Airport

It’ll be interesting to see how Sydney Airport shares react this morning to news the AustralianSuper has had a look at expanding it’s airport holding, but the current price is prohibitive.

The Australian Financial Review understands that Australia’s largest super fund has considered teaming up with the Kuwait Investment Authority and a handful of “other offshore investors” for Australia’s busiest airport.

No proposal has been put to the Sydney Airport board and a deal is not considered imminent, according to the newspaper. The AFR adds that the pair were interested at around $3 a share, where the stock was in January. But at its latest closing price, $3.84, it’s a bit steep apparently.

Big global investors, especially sovereign wealth funds, have been snapping up regulated infrastructure assets in a bid to secure long, consistent returns. Airports have been close to the top of the wish list. This idea at least is textbook.

Sydney Airport’s ownership structure was recently simplified and its foreign ownership limit was increased from 40 per cent to 49 per cent.

While this opens the door a little more for foreign investors to get a piece, it puts big private investors like AustralianSuper, or publicly-owned players like the Future Fund, to lynchpin a consortium deal.

With a market cap of $7.15 billion, Sydney Airport is no small fish. But the idea of AustralianSuper considering a run at Sydney Airport as it jabs at the Future Fund over Perth Airport is enticing.

AustralianSuper is currently leaning on lawyers to obtain documents from the Fund in relation to its Australian Infrastructure Fund bid that saw it obtain a stake in Perth.

The two giants are set to appear in court again in October 28 in what could end up being a prelude to Australian corporate law history.

Etihad Airways, Virgin Australia

Sir Richard Branson now counts himself as the forth placed investor in the Australian low-cost airline that bares his famous brand’s name.

Etihad Airways has listed its stake in Virgin Australia to 13.41 per cent from 12.35 per cent, surpassing Richard Branson’s Virgin Group in the process at 12.47 per cent. The Abu Dhabi group paid $11.8 million for 27.4 million additional Virgin Australia shares.

Etihad has approval from the Australian Foreign Investment Review Board to lift its stake to 19.9 per cent, which would put it on equal pegging with second largest shareholder Singapore Airlines. 

Air New Zealand speaks for 22.99 per cent of the register. The Australian Competition and Consumer Commission (ACCC) recently said it would not object to the Kiwi carrier boosting its stake to 26 per cent under creep provisions in the Corporations Act.

So let’s see now how their ambitions might collide: Air New Zealand’s 26 Etihad’s 20 Singapore Airline’s 20 Branson’s 12.5 = 78.5 per cent.

That’s a tightly held register between four heavyweights. It’s easy to see how if Air New Zealand and Etihad are to increase their stakes in Virgin Australia, it would be made a lot easier with Branson’s exit.

RHG, Resimac, Pepper Australia

The battle between cash and scrip continues to rage in the bid for RHG, with Pepper Australia taking some swipes at rival bidder Resimac over its “innacurate statements”.

On Friday, Pepper chief executive Patrick Tuttle said the announcement from Resimac claiming that its offer was superior to Pepper’s included “highly speculative and subjective” statements.

“It is preposterous to suggest that our cash and scrip offer is simply inferior by definition,” Tuttle said.

RHG is offering 51 cents a share based on the closing share price of co-bidder Cadence Capital, which is chipping in the scrip. Resimac is offering 49.5 cents in cash.

Hope floats

As Anchorage Capital prepares eyes off a $600 million float of Dick Smith Electronics sometime before the end of the year, the Australian IPO industry is broadly gearing up for its first Merry Christmas in some time.

The M&A/IPO industry has had many false dawn moments over the last two years as a series of proposed mega-deals were delayed and a disparate handful of floats failed to fire.

But things, at long last, are changing. There’s Anchorage with Dick Smith, Oaktree-Apollo with Nine and Pacific Equity that are looking at IPOs, to name a few.

“A combination of high prices and lack of asset quality caused few transactions in the last 12 months,”  Pacific Equity Partners founder Rickard Gardell told The Australian Financial Review. “This has now changed with some of the better assets returning, with lower price tags, and sale processes kicking off.” 

The one significant dark spot on the recent IPO ledger is iSelect, which is still trading well below its issue price. 

The Australian Securities and Investments Commission (ASIC) is demanding a swath of documents from the health insurance comparison website as part of an inquiry into continuous disclosure and fund-raising laws following the disastrous float.

The disappointing return to the ASX of department store Myer — still trading 30 per cent below its issue price — back in late 2009, coupled with the swift departure of former private equity owners from Australian shores without paying their tax liabilities helped solidify the notion to particularly retail investors that the system, and the market, were stacked against them.

While iSelect’s float has been an unquestionable balls-up, it’s crucially different to Myer.

Firstly, it’s smaller, so less investors have been burned. Secondly, the previous owners are committed.

The dip in the share price has led to buying over the past week or so from the six-person board, led by Damien Waller. He forked out $245,000 at an average price of $1.39.

That doesn’t change the result of the float. But it does give shareholders a crucial bit of evidence that the board truly believes that in three and a half years’ time they won’t be feeling as foolish as the Myer investors that hung in there.

Wrapping Up

No sooner had Bega Cheese put its offer to Warrnambool Cheese & Butter Factory, another big dairy company is set to hit the chopping block, according to The Australian.

The newspaper reports that Raleigh Dairies, one of Australia's largest operators not far from Coffs Harbour, will be put up for sale again, marketed by Colliers International.

The same newspaper also reports that Atlas Iron has tapped an investment bank to hunt for an equity partner for its early stage McPhee Creek mine.

Macquarie Group has reportedly raised an initial $US1.3 billion ($1.39 billion from institutional investors) for its Macquarie Infrastructure Partners III Fund.

The Australian Financial Review reports that US pension players and insurers, along with a handful of Aussie investors, are amongst the participants. Some of the proceeds will go towards building a new bridge in New York.

AGL has announced that its stake in Australian Power and Gas has increased to more than 75 per cent, adding that it hopes to speed up the final stages of the $100 million takeover.

The energy giant made the announcement on Friday after hearing from the competition regulator that there were no objections to its bid.

Aquila Resources is on the hunt for parties interested in taking a stake in its $7.7 billion Pilbara iron ore project in the event that joint venture partner AMCI bails.

And finally, Coca-Cola Amatil has picked up Fijian premium craft lager Yonu Beer. Thank goodness summer is on the horizon.