BREAKFAST DEALS: CVC sets up stall
CVC Asia Pacific begins the process of selling assets in order to dint its Nine debt, while Billabong takes a further step away from a takeover.
CVC Asia Pacific, Nine Entertainment, Ticketek
CVC Asia Pacific is getting the sales process moving for its events arm with the information memorandum going out today. The Australian Financial Review reports that the documents indicate the business, which includes Ticketek and Allphones Arena, has doubled in the last five years. Analysts have put the division’s value at around $600 million, a modest but important dent in the almost $3 billion debt pile that CVC’s sitting on from Nine Entertainment.
The newspaper says the memorandum portrays Ticketek as a defensive play, with music fans purchasing tickets whatever the economic environment is like. Indicative bids are said to be due in early May, with final offers falling by the end of the financial year.
Meanwhile, Nine Entertainment’s rag division, ACP Magazines, has offloaded Inside Cricket and Australian and New Zealand Snowboarding to private equity owned nextmedia for an undisclosed amount. They’d have been offloaded for a pittance, so it’s not a big deal financially. But to see a cricket magazine jettisoned from the Australian home of cricket, Channel Nine, just doesn’t seem right.
Surfwear retailer Billabong International has finished off its $276 million sale of almost half its stake in its Nixon accessories business. It’s an important milestone in its quest to restore value through asset sales, cost reductions and strategic shifts rather than through a takeover.
Billabong offloaded the 48.5 per cent stake in Nixon, one of its most successful units, to Triatlantic Capital Partners for $US285 million ($276.1 million). Billabong will keep a 48.5 per cent stake for itself, with the remaining 3 per cent held by Nixon management. The clothing company is shedding 400 jobs to save costs and has also installed Sally Pitkin to the board and sought the advice of retail consultant Launa Inman.
The company was the subject of intense takeover speculation a few months ago and received a few approaches from TPG Capital that ultimately settled on a price of $3.30 a share, or $842 million for the whole company. Founder Gordon Merchant doesn’t want to sell the company for anything less than $4. The task now is to prove to Billabong shareholders that such value can be unlocked. The company’s shares closed yesterday at $2.88.
Seek, Macquarie Capital, Zhaopin
Seek might not achieve the kind of value creation from floating Chinese jobs website Zhaopin as once thought. The Australian Financial Review brings word from Deutsche Bank analysts who estimate that Seek’s 56 per cent stake in Zhaopin is worth $464 million. That translates to an overall value of $828 million, when previous estimates have valued the company as high as $US1 billion ($966 million).
Two things need to be emphasised. Firstly, Seek maintains that floating Zhaopin on the Nasdaq is not a lock. Secondly, Zhaopin is still an incredibly successful investment. Seek put up $US45 million ($43.5 million) to increase its stake in Zhaopin to 43 per cent from 25 per cent in 2008, giving it an implied value of $241.6 million. At the time, Macquarie Capital threw in some cash for a 29.1 per cent stake and both companies would no doubt be happy with how valuations have progressed.
Amazon, Goodman Group
US internet retailing giant Amazon apparently needs a roof in Australia. According to Fairfax, Amazon has made it known to real estate agents that it’s interested in securing a warehouse Down Under. Given that Goodman Group has put together a number of warehouses for Amazon, it’s likely that discussions are taking place between the two as well.
The report says that company representatives are understood to be heading to Australia in coming months to have a look at potential sites along the east coast. With Australia’s retail internet making up about 10 per cent of the industry, while countries like Britain book numbers twice that amount, it makes sense that Amazon is looking to set up shop.
Huawei Australia, NBN Co
Huawei Australia board member Alexander Downer appears to be trying to reshape the discussion about the company’s exclusion from NBN Co contracts as symptomatic of Australia’s overall relationship with China, rather than a problem with an individual company. Speaking to the CommsDay Summit in Sydney, of which Huawei is a sponsor, Downer said the Australian government risks making an "enemy” out of China unless it gives the country’s companies the same opportunities as others in Australia.
Huawei has been excluded from the NBN contracts process so far due to concerns raised through talks between the Australian government and security agencies. Downer said he didn’t think that the government had "singled out just one company in that way”.
Sydney desalination plant
The timetable for final bids for leasing of the Sydney desalination plant, a contract worth $2 billion, appears to have shifted. Previous report have indicated that the final offers should have been submitted by now, but The Australian Financial Review reports that the deadline is in early May, with Spark Infrastructure Group considering entering the race.
So far, the listed contenders have been Hastings Funds Management, which is linking with Ontario Teachers Pension Plan and Korea’s National Pension Scheme (advised by Morgan Stanley and RBS Capital Markets), and Industry Funds Management (advised by Macquarie). If Spark jumps in, it’ll probably need to raise significant capital or partner with another player.
Grant Thornton, BDO
Australia’s seventh largest accounting firm has reportedly sealed the rescue package for the Melbourne and Sydney arms of rival operator BDO. The Australian Financial Review says rumours centre on a final price above the $50 million that partners voted on two weeks ago, but the details are still sketchy. The two businesses were chucked out of the BDO tent in March after they failed to get on top of $100 million in debt.
The federal government’s $10 billion Clean Energy Finance Corporation could make the future of a number of Australian companies struggling to get funding. Granted, the fund won’t start up until July 2013, so it’s a while away yet. But expect to hear some more rumblings about which companies are best placed to win their way into Canberra’s good graces.
BHP Billiton has copped a lot of flack for its $20 billion move into US shale gas. However, one of its top-20 shareholders, Fidelity, has come out in support of the miner’s move by arguing that these investments are made in terms of decades, not quarters, and it’s only a matter of time before the diverging paths of oil prices and gas prices start to turn back towards each other. Meanwhile, BHP’s main rival Rio Tinto has suffered a disappointing first quarter production report and its unwanted Pacific Aluminium division didn’t escape the downturn. Still, Rio is targeting record production figures by the end of the year, so maybe the outlook for Pacific Aluminium, set for a trade sale or IPO, might brighten a little.