DataRoom AM: IPO blitz
Within the space of two days, two Australian tech players have chosen to push for ASX floats over buyouts. It doesn’t just underline how Australia’s IPO drought will break, but what sector will play a big part in breaking it. Meanwhile, Etihad looks to have grabbed even more of Virgin Australia, Discovery Metals has a recapitalisation deal, Billabong has changed track for what appears to be the last time and Perpetual has won the ACCC’s trust.
OzForex, Goldman Sachs, Macquarie Capital
The army of companies marching towards the ASX is growing yet further.
The Australian Financial Review understands that the board of online currency platform OzForex approved an IPO yesterday after running a duel-track process.
Goldman Sachs and Macquarie Capital are tipped to underwrite the offer, which could see $480 million raised for exiting shareholders Macquarie Group, The Carlyle Group and Accel Partners.
Just like yesterday’s Data Room AM piece about fellow online operator Freelancer.com, OzForex had no shortage of interest buyers, yet the board has decided to favour a float.
That just piles on yet more confidence in the float strategy, an option that’s been in the doghouse for what seems like an eternity.
But now Virtus Health and Steadfast Group have gotten successful IPOs away, Nine Entertainment is pushing for a float by the end of the year, ditto Anchorage Capital with Dick Smith and Freelancer.com to name just a few.
It’s on people. IT…IS…ON!!
Virgin Australia, Etihad Airways
Etihad Airways looks like it has marched even higher up the Virgin Australia register with two big parcels of shares totalling 3 per cent changing hands yesterday.
Seventy-seven million shares were sold to a mystery buyer, highly suspected to be Etihad, by Patersons Securities at 48 cents apiece, or $37 million in total. The identity (or identities) of the seller/s remains unknown.
When we last heard from Etihad, the Middle Eastern carrier had jumped to 14.45 per cent from 12.4 per cent just a week or so ago. The latest move, if it is indeed Eithad (and it almost certainly is) would bring them to 17.5 per cent.
That puts the airline within striking distance of the 19.9 per cent limit it recently secured approval to move to from the Australian Foreign Investment Review Board (FIRB).
Etihad was left looking flat-footed after Singapore Airline’s Tiger Australia deal with Virgin delivered the fellow substantial shareholder a big parcel of shares from Richard Branson’s Virgin Group, which now holds just 12.47 per cent.
The Middle Eastern carrier had made it abundantly clear that it was interested in anyone and everyone that was selling Virgin stock and without a big block trade, it was going to have to hop, step and jump its way to 19.9 per cent.
Perhaps Sir Richard has helped Etihad in its latest skip up the register, perhaps he didn’t. But Etihad looks to be close to achieving its goal.
Discovery Metals, Blumont Group
Singapore’s Blumont Group has agreed to invest $US108 million ($113.5 million) in Discovery Metals that could lead to it controlling the copper miner.
Blumont will buy 73.1 million new shares in Discovery at 12 cents each, which will be coupled with a bond issue that will be convertible into shares at a cost of 15 cents a pop.
That arrangement means that Blumont could end up with up to 60 per cent of Discovery.
The ASX-listed miner will use the proceeds to reduce its debt load as well as fund development and exploration.
Discovery and its flagship Boseto project in Botswana was the subject of a $1.75 a share takeover offer from Chinese billionaire Yong Yu last year.
The target rejected Yong’s push for due diligence and he ultimately walked away, sniping occasionally from the sidelines about Discovery’s subsequent actions.
Some shareholders might feel aggrieved that Discovery didn’t engage with Yong over such a higher offer, but it’s kind of like the Billabong situation.
Big headline numbers always look tempting, particularly in hindsight. But when the suitor is opportunistic, or in Discovery’s case somewhat slippery, numbers are anything but a promise.
Billabong International, Centerbridge Partners, Oaktree Capital
At long last Billabong International, the fallen Australian surfwear icon, has secured a refinancing package that will put an end to a prolonged period of instability. No, we really, really, really are serious this time. Like totally, this is the last time and not like a John Farnham tour.
Billabong has walked away from a $325 million deal with Altamont Capital that could have delivered 40 per cent of the company to the American firm. Instead, the Aussie surfwear company has opted for a six-year, $386 million debt and equity package with US hedge funds Centerbridge Partners and Oaktree Capital.
Former Boston Consulting Group partner Neil Fiske has been appointed chief executive, casting aside former Oakley chief executive Scott Olivet in the process.
Billabong chairman Ian Pollard is adamant that the Centerbridge-Oaktree proposal is superior and he is correct.
It’s a six-year senior secured loan of $386 million at an interest rate of 11.5 per cent, against a previous proposal from the consortium of $325 million at 13.5 per cent.
By comparison, Altamont was offering $275 million over five years at 15 per cent and another $35 million at 10 per cent.
The winning consortium will emerge with between 33.9 per cent and 40.8 per cent in fully diluted equity, against Altamont’s proposal of up to 45 per cent.
While Centerbridge-Oaktree should feel vindicated that the superior proposal ultimately won out, Billabong behaved entirely appropriately when it told the hedge funds where to go when they originally rocked up at the last minute of 18 months of takeover jostling with a proposal that didn’t have any numbers with it.
This was when Billabong had all but signed with Altamont.
But all’s well that ends well. The last word would have to be that after 18 months, Billabong will be glad to see stories about its recovery, rather than emergency surgery from suitors. This column will be relieved to see those yarns as well.
The Trust Company, Perpetual, Equity Trustees, IOOF
The Australian Competition and Consumer Commission (ACCC) didn’t have any big surprises yesterday with its conditional approval of Perpetual’s $247 million bid for The Trust Company.
Perpetual has been told Trust Co’s 13.4 per cent stake in Equity Trustees, a rival bidder for Perpetual, must be divested.
If Perpetual’s bid is accepted, the third bidder for Trust Co, IOOF, will pick up the stake in Equity Trustees for $16.50 a share, or $19.7 million.
This is the path of least resistance. Perpetual, the big fish, takes out Trust Co. Then IOOF, the second biggest fish, could use the 13.4 per cent stake as a wave to take out the third biggest, Equity Trustees.
We’ll wait and see. But for now, Perpetual is in the box seat.
Wrapping up
Carlyle Group and Seven Group have opted to refinance about $1.8 billion in debt at Coates Hire after failing to find a buyer earlier this year.
Almost 90 per cent of its lending syndicate has agreed to extend the facility until September 2017 from its original expiry date of July 2015, according to Business Spectator’s Data Room.
Australia’s Wesfarmers and Japan’s Mitsui were amongst the companies interested in Coates when Goldmans Sachs was conducting a strategic review of the business.
Speaking of mining-related industries, mining services company NRW Holdings has won a $620 million contract for earthworks preparation at Gina Rinehart’s Roy Hill mine at Port Hedland. The work is specifically for the rail part of the project.
Elsewhere, AGL Energy will assume full ownership of Australian Power and Gas after leaping into compulsory acquisition territory yesterday.
In iron ore, BC Iron has formalised a deal with Cleveland Mining Company to earn up to 80 per cent of three projects in Brazil from local company Bahmex.
And finally, John Wylie, founder of private equity firm Next Capital, is planning to raise about $300 million for its third fund, also according to Data Room.