BREAKFAST DEALS: Clyne's British plot
National Australia Bank boss Cameron Clyne has given shareholders who want Clydesdale Bank and Yorkshire Bank out of their lives something to watch for. He still won’t be flogging the business for a steal, but there could be a way out courtesy of Number 10 Downing Street. Meanwhile, Singtel has some big names lined up for the Optus satellite business, Ruralco is apparently preparing a capital raising for the eventuality that it wins Elders’ rural services business and Skilled Group’s marine services acquisition is making some good waves.
National Australia Bank, Clydesdale Bank, Yorkshire Bank
National Australia Bank boss Cameron Clyne has suggested that the lender may be interested in floating its UK business if a few ducks line up.
According to media reports, Clyne sat down with journos yesterday for a long chat and inevitably Clydesdale Bank and Yorkshire Bank came up.
The NAB boss is highly respected throughout the industry and the quagmire that is the lender’s UK business, which was established well before Clyne took over, is the only issue that really detracts from his story.
Clyne stressed the UK economy is still in the toilet (admittedly, that’s not the word he used), having only just avoided a triple-dip recession, and Clydesdale and Yorkshire both have to be “seen to be on a standalone footing”.
The bank is confident that the latest structural changes will help do that and Clyne wouldn’t rule in or out an IPO down the track.
That’s interesting simply because most of the whispers around NAB have implied it would prefer a trade sale. That’s understandable, given the difficulty associated with floating a crumby business in a bad economy.
But Clyne did say he’d be watching to see how the UK government goes in its apparent plans to sell its 39 per cent stake in Lloyds Banking Group. If investors support the sale, it could influence NAB’s thinking.
That’s a dynamic that’s occurred in the wake of the global financial crisis, after governments ran out of stimulation cash. Sharemarket floats are hard to come by until a government does a big float to really test the market’s appetite.
In Australia the IPO drought was finally broken with the successful launch of Virtus Health last week. The stock is now up 14 per cent from the offer price. That’s an excellent float; they aren’t insane gains or disappointing losses.
That certainly helps and the conversation surrounding IPOs is starting to improve. But what investment bankers would really like is a big float to get people excited – Medibank Private would be perfect.
Fairfax reports that Medibank has been accused of “squeezing hospitals” to strengthen its balance sheet in the lead up a float under a Coalition government.
The government-owned health insurance provider denied the suggestion that any of its dealings with hospitals had anything to do with a potential float.
Singapore Telecommunications, Eutelsat Communications, Kohlberg Kravis Roberts
While a Medibank Private float would be a great way to jump-start the market, the Virtus IPO and the Optus satellite business bidding process are doing enough to give the local deals industry some reason to be optimistic.
According to media reports, France’s Eutelsat Communications and US private equity giant Kohlberg Kravis Roberts are among the bidders for the first round of the sales process for the $2 billion business.
Singapore Telecommunications, which owns Optus and is controlled by state investor Temasek Holdings, announced a review of the business in May.
Apparently England’s Inmarsat, Blackstone Group and Carlyle Group are also thought to have either made a bid, or are preparing to make a bid before Friday’s deadline.
Ruralco, Elders
Ruralco is reportedly planning a capital raising to help fund its possible acquisition of Elders' rural services business.
Elders is slated to return to trading today – although an extension of the trading halt wouldn’t be at all surprising – and Ruralco is, as it has always been, in the hot seat to win the business it hoped to merge with last year.
The Australian Financial Review has spoken to sources that say the offer was being promoted to institutional investors last week.
Ruralco has some serious room to move. The stock has risen a staggering 24 per cent since the beginning of May. A discounted issue won’t be a problem.
Skilled Group, Broadsword Marine Contractors
Workforce services company Skilled Group has received a resounding endorsement from shareholders for its decision to buy a North Territory-based marine contractor.
Skilled will pay a total of $75.5 million for Broadsword Marine Contractors, $48.8 million upfront and $26.7 million over three years.
The Victorian-based company’s shares shot up a very impressive 9.6 per cent to finish the session at $2.39, giving the company a valuation of $558.2 million.
That’s an impressive performance. When a company announces a big acquisition, almost regardless of the circumstances, it’s common for the stock to drop. The simple reason is that money is going into the pockets of the target’s owners, not the suitor’s shareholders.
What helps Skilled is that it isn’t tapping shareholders for funds, which dilutes investors and discounts the stock.
The whole deal will be funded by its existing debt facilities and its gearing will not go above 20 per cent. That’s all perfectly reasonable; this deal isn’t a stretch so shareholders can concentrate on whether the idea makes sense to them.
Skilled boss Mick McMahon told shareholders that the Broadsword deal would expand the company’s geographic footprint and increase its exposure to oil and gas players. When we talk marine services, we’re talking floating LNG plants.
“Marine services are a necessary ingredient for floating LNG as well as more traditional LNG construction," said McMahon.
“It also improves our exposure to other phases of activity, so not just construction but exploration and operations and maintenance – so we can see quite a pipeline of activity here over the years.”
Investors liked the sound of that.
Wrapping up
The Australian Financial Review reports that not all is well over at Careers Australia Group.
Apparently a new takeover proposal from Europe’s White Cloud Capital Advisors has been knocked back by the training company as too low and a number of minority shareholders have applied to the Takeovers Panel for the suitor’s action.
White Cloud owns 45.2 per cent of Careers Australia Group via Cirrus Business Investment.
And finally, Icon Energy has chosen to exercise its put option rights with Beach Energy.
The deal means that Beach will have to take an additional 5 per cent stake in the ATP 855 gas tenement in the Cooper-Eromanga Basin on the eastern side of the Queensland-South Australia border.