Breakfast Deals: Transurban off-ramp

Former Transurban suitor CP2 looks to have sold its remaining stake in the company, while Steadfast Group breathes some life into the IPO market.

The final member of Transurban’s last consortium suitor appears to have sold out, collecting a handy profit on its stake. Steadfast Group’s bookrunners will be taking bids today for its highly anticipated float. Meanwhile, OZ Minerals has missed out on Northparkes and the Cobbora site is unlikely to be packaged with Macquarie Generation by the New South Wales government.

Transurban, CP2

The market has been given a reminder of how tollroad operator Transurban, once considered a near-certain takeover target, is still flying solo.

Investment bank UBS handled a sale yesterday of 70.6 million shares, or about 4.8 per cent of the Transurban register, at $6.76 a share for a total of $477 million.

It’s strongly thought that the seller was CP2. We’ll have to wait for confirmation.

Back in 2010, the infrastructure fund manager teamed up with Canada Pension Plan Investment Board and Ontario Teachers Pension Plan on a $7.2 billion bid for Transurban.

It failed. Today, Transurban is worth $10.3 billion and the one-time suitors have all left unfulfilled.

CP2 offloaded a chunk of stock back in March last year for $669 million. Since then, Transurban shares have rallied 21.6 per cent. That’s as good an excuse as ever to sell out.

When a former suitor does reach for the exit, it’s often argued that it makes the company in question an easier target. That is, if the departing company commanded a stake that could have been used as a nuisance.

That’s hardly the case here. A stake of less than 5 per cent is not enough to cause a fuss if another bidder came along.

Additionally, if it were a consortium, CP2 could have been a willing partner.

Steadfast Group

The bookrunners for insurance broker Steadfast Group will start taking bids today with the hope of raising $334 million.

JPMorgan and Macquarie Capital are running the show. If the float goes well, it will breathe yet more life into Australia’s recently troubled IPO industry.

We’ll be keeping an eye out for who the big movers are. It’s always possible in an IPO that a strategic player takes an initial stake with greater goals in mind.

Best of luck to Steadfast.

Speaking of floats, Anchorage Capital Partners is reportedly thinking about exiting Dick Smith Electronics before even delivering final payment to previous owner Woolworths.

The Australian Financial Review understands that Anchorage has met with a few investments banks for “bank education”, adding that an IPO is the private equity firm’s most likely path to exit.

OZ Minerals, Rio Tinto, China Molybdenum

It might be easy for some OZ Minerals shareholders to feel let down by yesterday’s news that it not only missed out on Rio Tinto’s 80 per cent stake in Northparkes, but also issued a writedown of its flagship Prominent Hill mine of up to $240 million.

As explained by Business Spectator’s Stephen Bartholomeusz, the two events were purely coincidental. But it did underline the reality that OZ could really do with a replacement asset for Prominent Hill soon. We’ll get to that in a moment.

Firstly though, to the victor. China Molybdenum won the day with a bid of $US820 million ($886 million). That was too much firepower for OZ boss Terry Burgess, who has been steadfast in his commitment not to blow the miner’s $700 million warchest on an unwise acquisition.

Interesting perhaps only for Australian investors, China Molybdenum is backed largely by the Luoyang provincial government, which owns almost 35 per cent, and one Yu Yong, who owns 34 per cent.

Yu is the billionaire behind Cathay Fortune, the Chinese private equity firm that made a few runs for Discovery Metals that all, ultimately, end poorly. Discovery was at one stage looking at a slippery $824 million offer, but finished yesterday’s session with a market cap of $75.5 million.

It should be said that Northparkes joint venture partner, Sumitomo Metal, has pre-emptive rights over the stake. At this stage there’s no indication as to whether it will match China Molybdenum but, for what it’s worth, it’s a good price.

As for OZ, the question will be put to Burgess again and again as to whether he should continue waiting for an asset to come along instead of returning some cash to shareholders.

And while we’re talking Rio, underground development of the company’s Oyu Tolgoi copper-gold mine in Mongolia has been delayed as the miner waits for financing approval from the country’s government.

Macquarie Generation

The New South Wales government is reportedly likely to keep the undeveloped Cobbora coal project out of its planned sale of Macquarie Generation, only putting it on the table if asked.

State treasurer Mike Baird is set to launch the sale today, which is listed on the government’s books at $2 billion.

The Australian Financial Review reports that it’s likely Cobbora will be left out of the sale. Interest in Macquarie Generation is expected to be significant.

The move is the latest in a series of steps the NSW government has made towards privatising its electricity industry.

Just last week, CLP HoldingsEnergyAustralia paid $160 million for the Mt Piper and Wallerawang power stations, both located in NSW Central West.

In doing so the Coalition government unwound the measures put in place by the previous Labor government that put the state on the line for $200 million in liabilities.

Wrapping up

The first six months of 2013 have proved to be a bad start for the Australian resources sector, at least from a merger and acquisitions point of view.

Data compiled by Ernst & Young indicates that just 46 deals worth a combined $US1.7 billion were done, down from 107 deals worth $US9 billion in the previous corresponding period.

US agribusiness company CHS has bought into the marketing arm of Ruralco, Agfarm, taking a 50 per cent stake for an undisclosed amount.

The deal comes as another American, Archer Daniels Midland, looks to stake its claim to Australian grain, via a $3 billion-plus bid for GrainCorp.

And finally, in the past this column has covered the wheeling and dealing of fallen coal tycoon Nathan Tinkler.

Anyone interested in the yarn simply has to watch the latest episode of Four Corners. It’s a cracker.

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