DataRoom AM: Healthscope chatter

Healthscope’s next move is still unclear, with contrasting rumours circulating on whether a trade sale or IPO is favoured, while Spotless enjoys a dominant first day back on the ASX.

The mystery surrounding the divestment of Healthscope by its private equity owners lingers as rumours of a trade sale and an IPO remain prominent. But perhaps the latest action on markets tilts towards a float as the preferred choice.

Elsewhere, Spotless Group starts off its new life as an ASX company in fine style, investors make a mighty bet on a fresh takeover bid for Treasury Wine Estates and UGL’s planned divestment of its property services arm comes off life support.

TPG Capital and The Carlyle Group appear uncertain on the best way forward on a divestment of Healthscope, with contrasting rumours on whether an IPO or trade sale is favoured. As it stands it appears a near $5 billion float or sale should be sorted out within the next few weeks as revised bids are sought from buyers and the groundwork is laid for a July listing.

According to The Australian Financial Review, the trade sale has been impacted by a push from the three lead suitors to chase a majority stake in the business rather than full ownership. This has reportedly put an IPO in the front seat, with the company hosting several large potential investors to press for a cornerstone investor ahead of a float. Despite this, it is believed a second round bidding process may also be underway with America’s HCA likely a lead contender, potentially facing off against local conglomerate Wesfarmers.

Healthscope’s owners may be emboldened for a float by the solid return to the markets of Spotless Group on Friday, which jumped 7 per cent during its first day back on the ASX. Catering firm Spotless has more in common with the hospital operator than first meets the eye, with its successful listing coming just two years after it was delisted following a buyout by private equity (Healthscope was erased from ASX boards after its acquisition by private equity four years ago).

The Spotless float raised just shy of $1bn, valuing the firm at about $1.9bn.

In other IPO news, Mantra Group may retest the waters on a $400m listing this year after aborting earlier in March when the market was less amenable to new listings, the AFR reports.

In M&A action, Treasury Wine Estates remains firmly in the spotlight amid rumours China-owned Bright Food Group could make a rival bid to the $3bn offer put forward by private equity firm KKR. The speculation has been somewhat hosed down by a Bloomberg report quoting Bright denying it has discussed a bid internally, but investors nonetheless think that where there’s smoke there must be fire.

TWE stock is now at $5.17 after a strong surge Friday, leaving it 10 per cent above the initial bid of KKR. It’s a major bet on a bigger offer emerging, but you can’t help but wonder whether the bet may be on the heavy side.

UGL could yet find an appropriate suitor to offload its property services arm, DTZ, after appearing to be close to calling off the sale last week. The divestment appeared on life support after it was revealed that UGL received just one firm bid for DTZ, with that offer as much as $300m below the asking price.

However, there are now reports that the only bidder -- TPG Capital -- and the previously interested Warburg Pincus are at the negotiating table to see how close they can come to UGL’s target price of $1.3bn, with a sale price of $1.1bn-$1.2bn not out of the question.

Meanwhile, the latest bout of local M&A activity has seen Macquarie analysts revisit several names that could be the next targets in the local market. Among the firms mentioned were Ten NetworkIOOFEcho EntertainmentWhitehaven Coal, ChallengerQubeTransfield and Sydney Airport.

Finally, David Jones’ largest investors appear to be getting behind the $2.15bn bid from South Africa’s Woolworths, leaving little doubt the offer will get the backing of the department store operator’s shareholders.