BREAKFAST DEALS: Coates hanger

A Coates IPO remains an uncertain option, while Seven's ConsMedia ambitions face obstacles.

This morning there are some loud IPO rumblings at Coates Hire, although a float mightn't be as certain as some in the media would have you believe. Elsewhere, Seven Group's Consolidated Media ambitions face delays, as Hastings Diversified Utilities Fund considers opening its books to APA Group.

Carlyle Group, Coates Hire, Seven Group

The potential float of Coates Hire appears to have been dragged from the realm of near certainty back to being one of several options.

There were widespread reports yesterday that Coates' shareholders, Kerry Stokes' Seven Group and US private equity firm Carlyle Group, would raise as much as $700 million through an initial public offering of the equipment hire company – the biggest private equity IPO since Myer's $2.2 billion float in 2009.

But Coates finance director James Welch has hit back with a warning that the media is getting ahead of itself.

"Contrary to online media reports, Coates Hire does not currently have an intention to conduct an initial public offering," Welch said in a statement on the company's website.

"The company is in the advanced stages of refinancing its senior credit facility and anticipates completing this process by the end of August.

"As is always the case, we continue to review various means of funding the continued strong growth of the Coates Hire business."

It's a reminder of the uncertain state of Australia's IPO markets. Just yesterday US-based medical device company Vibrynt dumped its plans for a $200 million float later this year due to a lack of investor interest.

That's not to say a Coates float won't happen. Seven and Carlyle have already hired Deutsche Bank, Bank of America-Merrill Lynch, JPMorgan and Macquarie to advise on the potential deal, according to The Australian Financial Review.

Commonwealth Bank of Australia would also get a guernsey as co-lead manager, while Gilbert & Tobin is expected to provide legal advice.

In an IPO situation, the two parent companies would likely retain their respective stakes – each around 46 per cent – and raise an additional $500 million to $700 million. But a sell-down is possible.

Either way, Coates would probably have a market cap north of $2 billion.

Consolidated Media, Seven Group

That's not the only uncertainty surrounding Seven. The media giant's plan to take full control of Consolidated Media also appears to have hit a roadblock.

The Australian Competition and Consumer Commission wants more information about the deal, which would see Seven take the 76 per cent of ConsMedia it does not already own. The competition regulator has suspended the timeline for its inquiry while it waits.

The ACCC was scheduled to hand down a ruling next Thursday — the same day it is expected to decide on News Limited's $2 billion bid for ConsMedia. No changes there.

APA Group, Hastings Diversified Utilities Fund

Hastings Diversified Utilities Fund is still considering whether to allow APA Group to examine its books, after the wannabe buyer trumped a rival offer from Pipeline Partners Australia.

HDF says it has assembled a subcommittee of independent directors to "engage" with APA about the terms on which due diligence would be granted. It also wants to discuss the suitors ability to lift its bid from the previous $2-a-share to the potential $2.50.

It's difficult to see how HDF could turn down APA, given that PPA was welcomed into the data room with a bid worth $2.325 per share. The only real difference is that PPA is offering cash and APA is offering a combination of cash and scrip.

For its part, PPA has reserved the right to lift its bid – and there is increased speculation that it will. Importantly, it already has the backing of the independent directors.

Qantas Airways, Emirates

Qantas Airways has given a subtle nod to reports it is in talks with Emirates over an alliance, which was enough to excite investors – the Flying Kangaroo's shares closed 9.6 per cent higher at $1.085 yesterday.

Qantas' statement yesterday didn't seem to contain much in the way of market-moving detail: the carrier confirmed it was in talks with several airlines, including Emirates, about "potential commercial cooperation." But it wouldn't elaborate on the nature or status of those discussions.

However, it did add legitimacy to reports that put Qantas and Emirates in late-stage discussions about a significant code share agreement aimed at stemming the Australian airline's international losses. So significant, in fact, that it might replace Qantas' long-standing joint venture with British Airways.

While there were suggestions that a deal is imminent, The Australian understands it could be months before any agreement is reached – if at all.

Meanwhile, unnamed Canberra sources told The Australian Financial Review the government would not block a commercial alliance unless it involved Emirates taking equity in Qantas. The greater barrier would probably be the Australian Competition and Consumer Commission.

The share price suggests investors don't seem to mind about the details at this stage. For an airline struggling to keep pace with deal-happy rivals such as Virgin Australia, it's a start.

Wrapping up

Mining tycoon Gina Rinehart appears to have inked two new deals in Singapore, but they're not the headline-grabbing mining or media investments you might expect.

Singapore's Business Times reports that a group linked to Rinehart's Hancock Prospecting has forked out $S57.2 million ($44.1 million) for two luxury apartments at the ultra-high-end Seven Palms Sentosa Cove development.

Could this be Gina's new holiday hangout?

In the telecommunications sector, Optus plans to boost its digital content offering with its proposed $6 million acquisition of Australian restaurant review website, Eatability.

If Optus closes the deal – it still requires approval by Australia's Foreign Investment Review Board – the telco plans to bring Eatability to smartphones, in a challenge to rival services such as Yelp. The move follows the purchase of a similar food site, HungryGoWhere, by Optus' parent company SingTel.

Meanwhile, Metal Storm's stakeholders may find some comfort in news that buyers are already circling the weapons company, after it collapsed into voluntary administration yesterday.

Administrator Adam Shepard, of Deal-Willcocks Shepard Recovery and Strategy, told AAP two Australian companies have expressed interest in buying the Metal Storm. Shepard says international companies might also come forward once news of Metal Storm's demise spreads.

The collapse came after after a complex financing deal between Metal Storm, Special Opportunity Fund and Luxinvest Capital Advisors fell through, leaving the troubled Queensland company with unserviceable debts of between $15 and $18 million.

Finally, Gunns has raised $64 million from the sale of part of its interest in the Green Triangle Forrest Trust, as part of its desperate fight to recapitalise.

The Tasmanian woodchipper revealed it had sold 58.18 per cent of its investment. It's still searching for a buyer for the remainder of its stake.

Want access to our latest research and new buy ideas?

Start a free 15 day trial and gain access to our research, recommendations and market-beating model portfolios.

Sign up for free

Related Articles