DataRoom AM: Float frenzy

The Australian Securities Exchange is gearing up for a big week of floats, with over $4 billion worth slated for this week alone. And all three – Dick Smith Holdings, Nine Entertainment and Veda – are expected to be well received by the market. The big question is, how long until investor fatigue sets in?

Elsewhere, Inghams Enterprises could join the IPO queue for 2014, Qantas Airways denies the need for a capital raising, the Queensland government looks to offload half its stake in Aurizon Holdings and Ramsay Health Care continues its French expansion.

IPO market, Nine Entertainment, Dick Smith Holdings, Veda, Cover-More

The biggest week for the IPO market is upon us, with companies worth around $4 billion joining the late year burst of activity.

The most closely watched will be the $520 million float of Dick Smith Holdings, which will join ASX boards on Wednesday, and the $2.2 billion float of Nine Entertainment, which will hit boards on Friday.

Add in the $1 billion IPO of credit checking business Veda and the listings of the $250 million Industria REIT and Life Healthcare, and it’s quite a windfall for investment banks after years of weak interest in floats.

Indeed, the week is the biggest test yet of strength in the IPO sector following positive developments through the success stories of Freelancer, OzForex and, to a lesser extent, McAleese Transport.

All three big name companies trade comfortably above their listing prices.

It is Nine, however, which will be most closely watched, with its bookbuild beginning today. It is widely expected the group offload shares toward the lower end of its $2.05-$2.35 range.

Provided it does just that, expect a positive first day of trading as retail investors clamour for a slice of the most well-known name listing in 2013. That’s not to say it’s a good investment, however, with concerns about the future of media surely weighing on investors minds.

Dick Smith, meanwhile, is harder to judge. Its float represents a rapid turnaround in value from the $94 million paid by private equity firm Anchorage Capital Partners last year, which raises eyebrows. If there were to be signs of investor fatigue in the IPO market then surely they will be most likely to be shown in a company that is part of the troubled retail sector.

Another major listing slated for December is that of online travel insurance business Cover-More. The company has shrugged off worries about it being rushed to market, securing cornerstone investors for the float ahead of a December 19 listing date.

The group’s prospectus was released yesterday, showing owner Crescent Capital Partners will retain a stake of just 13 per cent after 260.6 million shares are sold at $2 each.

Cover-More’s IPO will raise $521 million and see the group have an enterprise value of $700 million.

The lead advisors on the float are Macquarie Capital and UBS.

The other big float on the agenda is Pact Group, which will raise $649 million when it lists on December 17.

Meanwhile, a small but closely watched IPO will be that of dorsaVi Ltd, which is due to be added to ASX boards on December 11.

The group’s $18 million float has closed oversubscribed and will value it at $48.5 million. Given the limited stock on offer a strong first day appears assured, though it would be surprising if it could top the success of Freelancer.

DorsaVi has developed a movement monitoring system that it believes can aid with injury prevention and has already secured clients in the form of five AFL clubs and two English Premier League teams.

Inghams Enterprises, TPG Capital

While the end to 2013 will be a strong one for the IPO market, 2014 promises to hold its own with potential floats of Medibank Private and Seek’s 50 per cent-owned IDP Education. There have also been murmurings around Healthscope and Queensland Motorways, though the former is mere gossip at this stage while the latter may be more likely to pursue a trade sale.

Regardless, there’s billions of possibilities for the IPO market, with the latest being rumours of a 2014 float of Inghams Enterprises. The famous poultry producer was acquired from the Ingham family by TPG Capital in March for $880 million and The Australian Financial Review believes a $1 billion-plus listing is being considered for the second half of 2014.

The 94 year-old business, however, may instead be ripe for a refinancing through the US Term Loan B market, which would allow TPG to take some money out and redistribute it to investors, according to the report. The other option reportedly being considered is the sale and leaseback of the group’s real estate assets.

With the property sector strong, interest rates low and the IPO market booming, TPG is well positioned regardless of which option it pursues.

Qantas Airways

As the debate over foreign ownership in the aviation sector rages on, Qantas boss Alan Joyce has distanced his company from calls to raise capital.

"We've been very clear in our position. We have $2.8 billion in cash. We have a position where we have a number of non-core assets we are selling and we are in the position where we have a number of unencumbered aircraft," he said, according to The Australian.

"We have lots of flexibility and there are lots of options that the group has going forward."

There are concerns that without either a guarantee from the government or an equity purchase by the Commonwealth the airline will be forced to tap equity markets. However, it appears Joyce is confident a continued push to sell off non-core assets, like its defence unit earlier this year, will be enough to ensure its cashflow remains at a high enough level.

A ratings downgrade could change that.

Aurizon Holdings, UBS, Queensland government

UBS is looking to offload $300 million worth of Aurizon Holdings shares for the Queensland government, according to The Australian Financial Review.

According to the report, the investment bank was seeking bids last night at around $4.71, which is a 1 per cent premium to its closing price on Monday.

The deal would represent about 50 per cent of the government’s 8 per cent stake in the rail freight company, which it privatised through a $4 billion float back in 2010 under the name of QR National.

The deal is the latest in a recent spate of large block trades, including the sale of holdings in Fortescue Metals Group and Australand.

Ramsay Health Care

ASX-listed hospitals operator Ramsay Health Care is pushing on with its European expansion, confirming yesterday it will pay $223 million to acquire French mental health clinic operator Medipsy.

The deal will see Ramsay’s French subsidiary, Ramsay Sante, take control of Medipsy’s 30 hospitals and over 2600 beds from the end of the year.

The move is the latest in a string that has seen Ramsay move from a base of nothing in France to now being the country’s third largest healthcare operator. This is the biggest deal of late for the group, which has been pursuing bolt-on acquisitions in the region.

The deal will be funded by cash and debt facilities held by Ramsay Sante, as well as funds from Ramsay’s UK division.

Wrapping up

Whitehaven Coal has announced a restructuring of a $1.2 billion debt facility due to slow progress on its flagship Maules Creek project. The ASX-listed group, once the subject of a Nathan Tinkler takeover bid, said it had moved the interest coverage ratio test back due to delays with Maules Creek. The interest coverage ratio test was due to be first applied in December next year, but Maules Creek won’t be in production until 2015. Mining had originally been slated to begin this month.

Overseas, private equity firm Blackstone Group has announced plans to raise $US2.37 billion in an IPO of Hilton Worldwide Inc this month. The float, which will value the company at as much as $US32.5 billion, will be the largest ever for a hotel operator.

Finally, LVMH Moet Hennessy Louis Vuitton SA has acquired 40 per cent of Melbourne-based clothing company 2XU for $80 million. The deal values the company at $200 million, which represents a quick rise for the company founded in 2005.