As the Twitter float goes off with a bang in the US, the Australian IPO market continues to gain traction of its own. The latest developments include an update on what promises to be the biggest float of the year. But just how much is Raphael Geminder’s Pact Group worth?
Elsewhere, Wesfarmers cools on an insurance sale, Bega Cheese plays the waiting game on Warrnambool Cheese and Butter and the privatisation spree continues apace. This time five Brisbane toll roads could be up for grabs.
Pact Group, dorsaVi Ltd
Broker research on the planned float of Pact Group has arrived at fund managers’ desks around the country, revealing valuations of between $1.62 billion and $2.11 billion from investment banks Deutsche Bank, Credit Suisse and Macquarie Capital. It also highlights a pending purchase in Asia.
Pact, owned by billionaire Raphael Geminder, wants to take full control of Indonesian-based Dynapack, which has 17 plants across Asia. Currently the packaging group owns 50 per cent, with a takeover representing a part of Geminder’s plan to turn the company into a $5 billion global enterprise within the next five years.
It will need to be approved by shareholders after listing.
Of the lead managers on the float, Macquarie Capital holds the most optimistic, and widest, valuation – $1.62 billion to $2.11 billion – while Deutsche maintains the most pessimistic – $1.62 billion to $1.82 billion. It appears as if all three float managers, however, believe a $1.8 billion valuation is about right.
However, given the current frenzy of excitement in the IPO market, don’t be surprised if the market ascribes a valuation of over $2 billion at, or very soon after, the time of listing.
Geminder, meanwhile, is expected to sell down his stake to 40 per cent as the group raises around $650-$700 million through the December float. That figure will make it the largest IPO of the year on the ASX.
In other IPO news, human movement technology firm dorsaVi Ltd is hoping to raise $18 million through its upcoming float, providing it with a market value just shy of $50 million. It will be fully underwritten by Canaccord Genuity Australia, with the shares expected to begin trading on the ASX on December 11.
Other possible floats in the month of December include Dick Smith Electronics, Veda and Nine Entertainment, leading to the possibility of 2013 being the best year for IPOs since the financial crisis.
Queensland Investment Corporation, Queensland Motorways, Global Infrastructure Partners
Queensland Investment Corporation is mulling the sale of its $5 billion toll road operations, according to The Australian Financial Review.
The state government-owned entity is believed to be keen to put its Queensland Motorways subsidiary up for auction. This means investors have the opportunity to buy the rights to five Brisbane motorways: Gateway Motorways, Logan Motorway, Go Between Bridge, Legacy Way and ClemJones Tunnel.
The one problem for QIC is that toll roads in Australia have hardly been setting the world alight in recent times with both the ClemJones Tunnel, recently acquired by Queensland Motorways, and Sydney’s CrossCity Tunnel running sales with the assistance of receivers this year.
According to the report, however, strong demand for the ClemJones Tunnel was a factor behind the positioning of Queensland Motorways for a sale.
The AFR believes a deal will be sought by June and we can expect the Canadian pension funds to show the most interest.
Meanwhile, QIC is also capturing attention for abandoning a plan to purchase a majority stake in Queensland’s largest port.
Currently QIC has a 26.7 per cent stake in the Brisbane port and had first rights, along with fellow 26.7 per cent shareholder IFM Investors, to put an offer forward for the 26.7 per cent holding reportedly put on market by Global Infrastructure Partners. IFM investors, on the other hand, has not refused the opportunity, lobbing in a bid of an undisclosed sum.
It is thought Global Infrastruture Partners could make a return of over 50 per cent on its $614 million investment in 2010.
Wesfarmers Limited
Rumours of an imminent sale of the Wesfarmers insurance division remain mere speculation after the group’s managing director left the topic untouched at the company’s AGM yesterday.
“In our Wesfarmers Insurance division, performance is tracking to plan, and the outlook is positive in the absence of significant catastrophe events,” Richard Goyder said in what amounted to a simple trading update.
As we pointed out when the rumours first surfaced, a sale appeared odd given the business had just started gaining traction and the group’s insurance boss had said the division wasn’t for sale as late as August.
According to the AFR, which has led the speculation, Wesfarmers has pulled back on divestment plans after receiving cautions against a sale from some key shareholders.
Talks had been seen progressing to a final due diligence stage, but now it all appears to be on the backburner.
Bega Cheese, Warrnambool Cheese and Butter, Saputo, Murray Goulburn
There was a big build up to the latest Bega Cheese board meeting, but the result wasn’t what the market expected.
Bega, which currently has put forward an offer of 1.2 of its shares plus $2 cash per Warrnambool Cheese and Butter share, was believed likely to raise its bid for the keenly sought after dairy group and take it unconditional.
It did neither.
“Bega Cheese Limited’s board met today to consider the takeover offer for Warrnambool Cheese & Butter Factory Company Holdings Limited,” the company advised the market yesterday afternoon. “The board has not yet made a decision on whether to make changes to the offer but will continue to consider the matter.”
No end appears in sight for the long-running takeover saga as all parties take a deep breath and mull their next move.
The Twitter IPO has gone ahead with great success, raising $US1.82 billion through the sale of shares at $26, which was above the proposed $23-$25 range. It’s a fair sign of strong demand when the funds are raised above the highest figure in the range. It’s an even better sign when shares on the first day of trading soar 73 per cent at the open.
In a big win for those able to buy stock in the float, the company opened at $45.10, providing it with a market capitalisation of almost $US25 billion. The IPO had valued the company at $US14.2 billion; a pretty high valuation for a company with no profit and sales of just $500 million.
Regardless, the moves provide a further lift to IPO market confidence, which is already back close to boom levels. Now investors are left to wonder just how Twitter will turn popularity into profit.
Wrapping up
Seek has offloaded its 80 per cent stake in tertiary education company Think for cash proceeds of $104 million to Laureate International Universities. The deal, which gives Think an enterprise value of $140 million, is expected to settle by the end of January and offer Seek a small profit on what has sometimes been a troublesome asset.
In property, Mirvac Group has put down $552 million to acquire three properties in Melbourne and Sydney. The buildings - 367 Collins Street and 477 Collins Street in Melbourne as well as Sydney’s Harbourside Shopping Centre – are expected to be earnings accretive in the current financial year.
In media, Fairfax Media is still being pushed toward a Macquarie Radio Network merger by major shareholder Gina Rinehart. The two firms have reportedly been working on options for what would be a logical tie-up, but there appears to have been little progress.
Elsewhere, it is believed that Canada’s Teck Resources has sold out of Fortescue Metals Group, just a year after buying in at around $4.70. CIMB Group Holdings managed the sale of the 2.94 per cent stake, managing to reap $503 million by offloading stock at a 3.5 per cent discount to Thursday’s close, or $5.50.
Finally, Nestle has divested the Jenny Craig business in Australia, New Zealand, North America and the Pacific Islands. Private equity firm North Castle Partners has picked up the brand for an undisclosed sum that we suspect is well below the $600 million Nestle paid back in 2006.
