DataRoom AM: Budget sell-off

The Abbott government’s privatisation push could bring in $10bn if all goes to plan, while the fight for Healthscope appears far from over.

Privatisations are a hot topic as we head towards a budget that, like most others in recent times, has more answers than questions ahead of its official release. Indeed, there’s little we don’t know about the government’s intentions, but the precise nature of its divestment plans are a rare exception.

Elsewhere, the race for Healthscope appears far from over, Ramsay Health Care makes another bold European play and Qantas Airways completes a rare local market junk bond issue.

It now seems clear that Medibank Private will not be the only asset sold off by the Abbott government in its first term, with the Royal Australian MintDefence Housing AustraliaAustralian Hearing and the registry business of ASIC also set to go under the hammer. The nature of the divestment of the latter four remains up in the air, while Medibank will go down the IPO route.

In all, the privatisations could recoup $10 billion for the government, with close to $5bn from Medibank, up to $4bn from ASIC’s registry business, $1bn from Defence Housing and perhaps $200 million from Australian Hearing and the Mint. That, of course, assumes everything goes to plan and it rarely does. Indeed, the mint has little in the way of earnings and may be a tough sell and one could argue, something not worth pursuing.

Lurking in the shadows is Australia Post, with its future remaining delicately poised as it chases a new approach to curb free-flowing losses in its letters division. The firm’s boss Ahmed Fahour insists there has been no talk of a sale with him, but should the government take that route, it will be incredibly challenging to get through a hostile trio of Nationals senators, Greens politicians and unions.

Meanwhile, private Chinese firm Fosun Group has confirmed it is keeping a close eye on the sale of Healthscope, according to The Australian Financial Review, seeing substantial opportunity for expansion of the hospitals operator in China. The news comes just a week after rumours that US giant HCA Holdings may have outbid its rivals, including Fosun, with a $5bn offer, but the latest comments from the Chinese firm suggest the fight is far from over with Malaysia’s IHH potentially still in the mix.

A firm decision is tipped to be just weeks away, with owners TPG and The Carlyle Group still weighing an IPO.

Also in healthcare, Ramsay Health Care is pressing on with its strong acquisition push in Europe, this time entering exclusive talks to buy a listed French healthcare services group. Ramsay says it will team with Credit Agricole on the bid, with expectations that the ASX-listed firm will stump up about $800m to claim 57 per cent of target Generale de Sante. The acquisition will be debt funded and the JV has until June 6 to undertake due diligence and execute a biding offer.

Elsewhere, investment banks are angling for more aged care listings following the successful float of Japara this year. According to the AFR, pressure is building on Archer Capital and Quadrant Private Equity to chase listings of Allity and Estia Health, respectively. Both are considered possible additions to the IPO pipeline before the year is out.

In aviation, Qantas Airways has successfully sold $300m of unsecured fixed rate notes with assistance from Deutsche Bank. It is the first time the national carrier has tapped bond markets since its credit rating was downgraded to junk status.

In construction, what looked impossible last week has turned out as such with Hochtief’s partial takeover bid for Leighton Holdings falling short of its target. The German construction giant managed to lift its stake from about 59 per cent prior to the offer up to 69.62 per cent, but this was well short of hopes for a 74 per cent stake.

Finally, Singapore sovereign wealth fund GIC has tapped UBS for a $505m block trade of 8 per cent of the stock in property firm GPT Group.

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