BREAKFAST DEALS: CSR's sweet sale
Mums and dads are offered a more generous structure in CSR's capital raising, meaning that they won't be over-diluted by institutional investors if shareholder interest in the offer is strong.
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Mums and dads are offered a more generous structure in CSR's capital raising, meaning that they won't be over-diluted by institutional investors if shareholder interest in the offer is strong. Elsewhere, Myer receives strong investor interest, though Ascendia Retail delays its sporting goods float. Macquarie buys another finance firm and what will become of ING in Asia?
CSR
Any talk of investor fatigue for rights issues seems to be premature with another big capital raising expected to be gobbled up by institutional and retail investors. Admittedly that raising is by one of Australia's most recognisable corporate brands, CSR, and the company's offer to raise $375 million to help fund the demerger to separate its sugar and building products divisions will appeal to both sweet-tooths and to investors who prefer more solid assets. CSR's underwriters UBS and RBS Equity Capital Markets are certainly betting on strong retail interest, with a novel structure they've dubbed SAREO created to make the equity offer more equitable. SAREO, which stands for Simultaneous Accelerated Renounceable Entitlement Offer, was developed by the manager and sole bookrunner, UBS, to give retail investors three weeks to make up their minds before the aggregate remaining entitlements of renouncing and ineligible shareholders – both institutional and retail – are sold off by a bookbuild. Usually bookbuilds are conducted straight after the institutional offer, which most often comprises the bulk of the capital raised. Insto investors are typically sounded out, place capital and then participate in a rights issue followed by a bookbuild. Retail investors are then given a small offer to subscribe to. In cases like National Australia Bank's recent capital raising, retail investors have found that their ability to participate is capped regardless of their interest in getting the same juicy discounts as their institutional counterparts. Naturally enough, this has raised shareholder ire and with retail investors likely to remain an integral part of both the CSR sugar and CSR building products' corporate registries, there is certainly a motivation to keep them on-side. Then again, perhaps this newfound generosity can more be seen as a product of the times. Now that markets have stabilised (or crested before a fall if you're a sceptic), companies can afford to wait three weeks before a bookbuild and rely on the goodwill of hitherto gun-shy retail shareholders. For this reason, no exact figure has been given for the institutional/retail breakdown in CSR's offer. We'll see what happens but oversubscription of Elders' recent share purchase plan, the overwhelming retail support for AWB's non-renounceable entitlement offer ($241 million versus $218 million from the instos) and strong support for Myer's initial public offer by members of the shopping classes all augur well for CSR. Perhaps SAREO will become a recognisable acronym in future capital raisings. In terms of details, funds being raised will pay off a portion of $1.2 billion in combined debt. CSR's sugar division will end up with reduced liabilities of approximately $300 million, and the building products division will inherit $631 million. The deal will also see Mackay Sugar earn a 8.77 per cent stake in the sugar business in exchange for Mackay's quarter interest in a refining joint venture it conducts with CSR. Underwriting fees have been set at 2 per cent with UBS earning an extra 50 basis points for its management services. Lazard and Goldman Sachs JBWere are meanwhile advising CSR on the demerger.
Myer
Retail investors will make up 50 per cent of Myer's share register based on the present state of applications, sources say. Despite misgivings from a number of fund managers and other institutional investors (who were merely trying to push the price down, says Myer), retail investors and, in particular, Myer One loyalty card holders have joined the offer in droves. Whether it was the beguiling face of Jennifer Hawkins on the cover ("buy me" she seems to coo) or chief executive Bernie Brookes' optimistic forecast for the department store group's future earnings, warnings of overvaluation and the curse of private equity seem to have gone unheeded. The final price of the offer will be determined after Myer's institutional bookbuild is finished on Thursday, but there are suggestions that it will be in the upper range of the $3.90 to $4.90 per share guidance – a figure that, either way, will be well above CLSA's valuation of $3.55 or former Clime Capital boss Roger Montgomery's valuation of $2.90. As for the so-called privateer curse, current private equity owners TPG and Blum Capital are expected to use any buoyant demand for Myer shares to gracefully exit its entire investment. Cynics would describe that as a classic case of pump and dump at the top of the market, but others would counter that TPG wouldn't want to ruin its reputation in that way. That's the risk that shareholders, including the Myer family, who will be retaining a one per cent stake, will have to weigh against the rewards of buying into a chain of stores that have had $370 million of capital expenditure spent on them and a highly successful loyalty program.
Ascendia Retail
It's common wisdom that retail companies like Myer will need to float before Christmas to take advantage of investor enthusiasm and – if truth be told – to avoid a possible second dip in the sharemarket. Ascendia Retail, which owns Rebel Sport and Sports A-Mart, is, however, now planning to float itself as Rebel Group next year, and not this. The Archer Capital-owned group has applied for an extension to its listing plans for a further two months. The float is not expected now until February at the earliest. Goldman Sachs JBWere, UBS and Merrill Lynch are advising. GSJBW is also advising, along with Macquarie Capital, Kathmandu. As it happens, both of those banks are also advising Myer, along with Credit Suisse, so perhaps Ascendia's delay will also allow the investment bankers some necessary breathing space before the next retail float. After all, they have their Christmas shopping to do as well.
Macquarie Group
Speaking of over-worked investment bankers, Macquarie Group has just added another firm to its wall of scalps. The takeover of Blackmont Capital from CI Financial comes after Macquarie's acquisitions earlier this year of Fox-Pitt Kelton Cochran Caronia Waller, Delaware Investments and Tristone Capital. It is also rumoured that Macquarie is set to acquire the merchant banking division of Luxembourg-based Sal Oppenheim jr & Cie, a private bank that Deutsche Bank is otherwise believed to be taking over. Macquarie has paid $C93.3 million for Blackmont, which is one of Canada's biggest broker dealers. Macquarie has been keen to expand its wealth management division in North America and Blackmont's 450 largely Toronto-based employees will help deliver that. On a global level, Macquarie has been acting quickly to transform into a more traditional investment banking and wealth management business, rather than the "Macquarie model" fund factory it is better known for. Amid the internalisations and sell-offs of its various funds, another blow was struck just yesterday, according to The Age, when Macquarie International Infrastructure Fund, a Singapore-based asset manager, sold 71.6 per cent of its stake in the Macquarie European Infrastructure Fund for $S132 million. The sale effectively values the European fund at a 15 per cent discount to July's $S3.4 billion valuation.
ING Groep
Elsewhere in finance land, and continuing on the theme of companies that are demerging, Dutch bankassurer ING Groep has announced plans to split in two. ING is raising €7.5 billion via a rights issue to pay back half the bailout funds it has received from the Netherlands and to fund the separation. ING has already sold its private banking operations in Switzerland and Asia to Julius Baer and Oversea-Chinese Banking Corporation in, respectively. Australia and New Zealand Banking Group was thought, at one stage, to be interested in ING's Asian private bank, which is headed by the flamboyant Filipino banker Renato de Guzman, a man known to win over clients by bursting into song, but ANZ instead has only opted to buy ING's wealth management and life insurance business in Australia. ING, for the time being, is keeping its government guaranteed online savings bank in Australia. It is thought that ING will also keep its interests in India and Thailand as well as its stake in the Bank of Beijing. Both ANZ and the Commonwealth Bank of Australia have been thought to be eyeing a way to enter India's banking sector; ANZ is applying for an Indian banking licence and CBA have already obtained one. ING, on the other hand, may wish to sell some of its insurance assets in Europe. That's a market already awash with deals, however. Just in the last month or so Aviva, which sold its Australian operations to National Australia Bank, spun off its Dutch division, Delta Lloyd, via an initial public offer.
Wrapping up
ING and Sal Oppenheim aren't the only European banks in the limelight this week, with French newspaper Le Monde reporting that Credit Agricole is eyeing a three-way merger with Socit Gnrale and Groupama, the insurance company the two banks own together. Agricole has denied the rumours. Elsewhere in France, GDF Suez has confirmed its interest in buying lectricit de France's British distribution network, according to an interview in Le Figaro, and PSA Peugeot Citroen may sell part of its interest in Faurecia, a car parts maker, according to Les Echos. Telecom Italia has, meanwhile, denied that it is bidding for Telekom Austria and Indian state-owned telco Bharat Sanchar Nigam is apparently going cool on the idea of paying $US13.7 billion for a 46 per cent stake in Zain Telecom of Kuwait, a company with exposure to many high-growth emerging markets. In Deals TV later today we'll be looking at plans to list the China Minmetals-backed Minerals and Metals Group, chatter about Anglo American and the wonderful world of deal propaganda. For instance, did you know that BHP Billiton is now known as "Bad Boy" in China?
John Wylie, head of the Lazard Australian Corporate Advisory business, and Mark Carnegie, head of the Lazard Australian Private Equity business, are investors in Business Spectator.
Mums and dads are offered a more generous structure in CSR's capital raising, meaning that they won't be over-diluted by institutional investors if shareholder interest in the offer is strong. Elsewhere, Myer receives strong investor interest, though Ascendia Retail delays its sporting goods float. Macquarie buys another finance firm and what will become of ING in Asia?
CSR
Any talk of investor fatigue for rights issues seems to be premature with another big capital raising expected to be gobbled up by institutional and retail investors. Admittedly that raising is by one of Australia's most recognisable corporate brands, CSR, and the company's offer to raise $375 million to help fund the demerger to separate its sugar and building products divisions will appeal to both sweet-tooths and to investors who prefer more solid assets. CSR's underwriters UBS and RBS Equity Capital Markets are certainly betting on strong retail interest, with a novel structure they've dubbed SAREO created to make the equity offer more equitable. SAREO, which stands for Simultaneous Accelerated Renounceable Entitlement Offer, was developed by the manager and sole bookrunner, UBS, to give retail investors three weeks to make up their minds before the aggregate remaining entitlements of renouncing and ineligible shareholders – both institutional and retail – are sold off by a bookbuild. Usually bookbuilds are conducted straight after the institutional offer, which most often comprises the bulk of the capital raised. Insto investors are typically sounded out, place capital and then participate in a rights issue followed by a bookbuild. Retail investors are then given a small offer to subscribe to. In cases like National Australia Bank's recent capital raising, retail investors have found that their ability to participate is capped regardless of their interest in getting the same juicy discounts as their institutional counterparts. Naturally enough, this has raised shareholder ire and with retail investors likely to remain an integral part of both the CSR sugar and CSR building products' corporate registries, there is certainly a motivation to keep them on-side. Then again, perhaps this newfound generosity can more be seen as a product of the times. Now that markets have stabilised (or crested before a fall if you're a sceptic), companies can afford to wait three weeks before a bookbuild and rely on the goodwill of hitherto gun-shy retail shareholders. For this reason, no exact figure has been given for the institutional/retail breakdown in CSR's offer. We'll see what happens but oversubscription of Elders' recent share purchase plan, the overwhelming retail support for AWB's non-renounceable entitlement offer ($241 million versus $218 million from the instos) and strong support for Myer's initial public offer by members of the shopping classes all augur well for CSR. Perhaps SAREO will become a recognisable acronym in future capital raisings. In terms of details, funds being raised will pay off a portion of $1.2 billion in combined debt. CSR's sugar division will end up with reduced liabilities of approximately $300 million, and the building products division will inherit $631 million. The deal will also see Mackay Sugar earn a 8.77 per cent stake in the sugar business in exchange for Mackay's quarter interest in a refining joint venture it conducts with CSR. Underwriting fees have been set at 2 per cent with UBS earning an extra 50 basis points for its management services. Lazard and Goldman Sachs JBWere are meanwhile advising CSR on the demerger.
Myer
Retail investors will make up 50 per cent of Myer's share register based on the present state of applications, sources say. Despite misgivings from a number of fund managers and other institutional investors (who were merely trying to push the price down, says Myer), retail investors and, in particular, Myer One loyalty card holders have joined the offer in droves. Whether it was the beguiling face of Jennifer Hawkins on the cover ("buy me" she seems to coo) or chief executive Bernie Brookes' optimistic forecast for the department store group's future earnings, warnings of overvaluation and the curse of private equity seem to have gone unheeded. The final price of the offer will be determined after Myer's institutional bookbuild is finished on Thursday, but there are suggestions that it will be in the upper range of the $3.90 to $4.90 per share guidance – a figure that, either way, will be well above CLSA's valuation of $3.55 or former Clime Capital boss Roger Montgomery's valuation of $2.90. As for the so-called privateer curse, current private equity owners TPG and Blum Capital are expected to use any buoyant demand for Myer shares to gracefully exit its entire investment. Cynics would describe that as a classic case of pump and dump at the top of the market, but others would counter that TPG wouldn't want to ruin its reputation in that way. That's the risk that shareholders, including the Myer family, who will be retaining a one per cent stake, will have to weigh against the rewards of buying into a chain of stores that have had $370 million of capital expenditure spent on them and a highly successful loyalty program.
Ascendia Retail
It's common wisdom that retail companies like Myer will need to float before Christmas to take advantage of investor enthusiasm and – if truth be told – to avoid a possible second dip in the sharemarket. Ascendia Retail, which owns Rebel Sport and Sports A-Mart, is, however, now planning to float itself as Rebel Group next year, and not this. The Archer Capital-owned group has applied for an extension to its listing plans for a further two months. The float is not expected now until February at the earliest. Goldman Sachs JBWere, UBS and Merrill Lynch are advising. GSJBW is also advising, along with Macquarie Capital, Kathmandu. As it happens, both of those banks are also advising Myer, along with Credit Suisse, so perhaps Ascendia's delay will also allow the investment bankers some necessary breathing space before the next retail float. After all, they have their Christmas shopping to do as well.
Macquarie Group
Speaking of over-worked investment bankers, Macquarie Group has just added another firm to its wall of scalps. The takeover of Blackmont Capital from CI Financial comes after Macquarie's acquisitions earlier this year of Fox-Pitt Kelton Cochran Caronia Waller, Delaware Investments and Tristone Capital. It is also rumoured that Macquarie is set to acquire the merchant banking division of Luxembourg-based Sal Oppenheim jr & Cie, a private bank that Deutsche Bank is otherwise believed to be taking over. Macquarie has paid $C93.3 million for Blackmont, which is one of Canada's biggest broker dealers. Macquarie has been keen to expand its wealth management division in North America and Blackmont's 450 largely Toronto-based employees will help deliver that. On a global level, Macquarie has been acting quickly to transform into a more traditional investment banking and wealth management business, rather than the "Macquarie model" fund factory it is better known for. Amid the internalisations and sell-offs of its various funds, another blow was struck just yesterday, according to The Age, when Macquarie International Infrastructure Fund, a Singapore-based asset manager, sold 71.6 per cent of its stake in the Macquarie European Infrastructure Fund for $S132 million. The sale effectively values the European fund at a 15 per cent discount to July's $S3.4 billion valuation.
ING Groep
Elsewhere in finance land, and continuing on the theme of companies that are demerging, Dutch bankassurer ING Groep has announced plans to split in two. ING is raising €7.5 billion via a rights issue to pay back half the bailout funds it has received from the Netherlands and to fund the separation. ING has already sold its private banking operations in Switzerland and Asia to Julius Baer and Oversea-Chinese Banking Corporation in, respectively. Australia and New Zealand Banking Group was thought, at one stage, to be interested in ING's Asian private bank, which is headed by the flamboyant Filipino banker Renato de Guzman, a man known to win over clients by bursting into song, but ANZ instead has only opted to buy ING's wealth management and life insurance business in Australia. ING, for the time being, is keeping its government guaranteed online savings bank in Australia. It is thought that ING will also keep its interests in India and Thailand as well as its stake in the Bank of Beijing. Both ANZ and the Commonwealth Bank of Australia have been thought to be eyeing a way to enter India's banking sector; ANZ is applying for an Indian banking licence and CBA have already obtained one. ING, on the other hand, may wish to sell some of its insurance assets in Europe. That's a market already awash with deals, however. Just in the last month or so Aviva, which sold its Australian operations to National Australia Bank, spun off its Dutch division, Delta Lloyd, via an initial public offer.
Wrapping up
ING and Sal Oppenheim aren't the only European banks in the limelight this week, with French newspaper Le Monde reporting that Credit Agricole is eyeing a three-way merger with Socit Gnrale and Groupama, the insurance company the two banks own together. Agricole has denied the rumours. Elsewhere in France, GDF Suez has confirmed its interest in buying lectricit de France's British distribution network, according to an interview in Le Figaro, and PSA Peugeot Citroen may sell part of its interest in Faurecia, a car parts maker, according to Les Echos. Telecom Italia has, meanwhile, denied that it is bidding for Telekom Austria and Indian state-owned telco Bharat Sanchar Nigam is apparently going cool on the idea of paying $US13.7 billion for a 46 per cent stake in Zain Telecom of Kuwait, a company with exposure to many high-growth emerging markets. In Deals TV later today we'll be looking at plans to list the China Minmetals-backed Minerals and Metals Group, chatter about Anglo American and the wonderful world of deal propaganda. For instance, did you know that BHP Billiton is now known as "Bad Boy" in China?
John Wylie, head of the Lazard Australian Corporate Advisory business, and Mark Carnegie, head of the Lazard Australian Private Equity business, are investors in Business Spectator.
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