Qantas Airways is selling another non-core asset as Alan Joyce moves to truly shape the airline the way he wants to with the Emirates deal done. SP AusNet is at the centre of a big play by a Chinese state-owned enterprise for Australian power assets. Meanwhile, Virtus Health looks destined for a strong Australian IPO and a Canadian investment banker believes our state governments should get to flogging assets they don't need quickly if they want some Canadian love.
Qantas Airways chief executive Alan Joyce will no doubt be hoping that his airline’s share price does better this week than last week.
While the flying kangaroo’s stock is changing hands at prices 29 per cent higher than six months ago, the shares lost 9.6 per cent last week against a flat benchmark index.
Low cost rival Virgin Australia issued a profit guidance downgrade last week and had a bloody good reason to finish the week in seriously negative territory. It did, but ahead of Qantas with a 7.7 per cent drop. Bad, but not as bad.
Shareholders might take some solace from news that Joyce is reportedly moving towards divesting another non-core asset.
The Australian Financial Review understands that Qantas is searching for a buyer for its defence services arm, which could generate between $80 million and $100 million for the carrier.
It is also understood that Joyce is considering selling Qantas’ long-term passenger terminal leases at four airports, two of which are Melbourne and Sydney.
That could generate up to $1 billion.
Joyce is now in his fifth year as Qantas boss, having seen off a stealthy challenge from his predecessor Geoff Dixon.
Given that Dixon served for eight years in the top job and Joyce is still a spritely 46 years old and with the all-important Emirates alliance behind him, this columnist believes there’s a big deal, maybe two, to come from the Irish-born Australian national before he names his successor.
China’s State Grid Corporation has apparently been talking to Temasek Holdings’ Singapore Power for as long as six months about buying assets the seller probably wanted off its hands anyway, with not a peep of news leaked to the media. Nice moves!
Singapore Power is planning to sell a 20 per cent stake in SP AusNet, which will see its own share of the company fall from 51 per cent to 31.1 per cent.
Separately, Singapore Power has also agreed to sell 60 per cent of the shares in the unlisted SPI (Australia) Assets.
Singapore Power will collect $824 million from the SP AusNet deal, and an anticipated $5 billion from the SPIAA assets.
As Business Spectator’s Stephen Bartholomeusz explains, the deal will see State Grid get its hands on a raft of key assets including electricity transmission and distribution networks in Victoria and gas distribution networks in New South Wales.
But the Australian Competition and Consumer Commission and, more importantly, the Foreign Investment Review Board will have to give their thumbs up before this deal can be consummated.
On the face of it, control is passing from one Singapore government-controlled vehicle to a Chinese government-controlled vehicle. What’s the big deal?
When it’s China, it’s always a big deal.
Fertility clinic Virtus Health is set to become the world’s first IVF company to list on a sharemarket.
The company is slated to list on the Australian Stock Exchange with a market cap of about $450 million after an enormously successful bookbuild last week that saw Quadrant Private Equity sell its entire 43 per cent stake.
The IPO is set for June 11.
Virtus is behind about a third of Australia’s IVF treatments, and with interest in the stock undoubtedly influenced by a lack of floats in the Australian market, this is an important one for the ASX.
Across the Tasman, New Zealanders have got Mighty River Power up and away, and attention is now shifting to Meridian Energy. Both of them are billion dollar-plus headliners.
Australia doesn’t have the benefit of government asset sales with Queensland Premier Campbell Newman struggling with the political realities of privatisations and the federal government keeping the seats warm for the Coalition.
So at the moment it’s up to private operators to rekindle the market’s fortunes.
Best of luck to Virtus Health when the first trading day comes around, and best wishes to their staff and clients.
Speaking of the ASX’s need for privatisations, RBS Capital Markets' Australian investment banking boss Dominic Hudson believes our state governments should start flogging some assets in order to take advantage of the interest from Canadian pension funds.
The Australian reports that Hudson, who helped out Ontario Teachers Pension Plan with its bid for Port Botany, told a function on Friday that demand is hot at the moment and state governments have a limited window to take advantage of it.
Meanwhile, Crown billionaire James Packer has received final official clearance to take a larger stake in rival Echo Entertainment.
The Queensland Office of Liquor and Gaming Regulation gave the go-ahead for Crown to increase its stake from 10 per cent to 25 per cent last week.
The regulator’s New South Wales counterpart did the same a week ago, but the limit imposed was 23 per cent.
And finally, Peet has gone unconditional in its bid for CIC Australia. That $76 million deal is done.