DataRoom AM: Juicy deals

Retail Zoo, owner of Boost Juice, could fall to an apex predator, while Saputo is having a hard time convincing Kirin Holdings and Bega Cheese to play ball.

The majority private equity-owned Retail Zoo, which runs the Boost Juice franchise, could soon find itself in the hands of another private equity player. The Riverside Company has reportedly entered exclusive discussions with one bidder, with a highly profitable deal worth over $200 million tipped to be on the way.

Elsewhere, the dust clears on the likely bidders for Shell’s Australian assets, Saputo readies for an extension to its Warrnambool Cheese & Butter bid, Fonterra eyes Bega Cheese, Sandfire Resources distances itself from Oz Minerals buyout rumours and ANZ Banking Group’s Hong Kong expansion plans become limited.

Boost Juice, Retail Zoo, Affinity Equity Partners

It appears the October rumours of a sale of Retail Zoo – the owner of the Boost Juice franchise – were on the money, with reports surfacing of exclusive negotiations with a leading Asia-Pacific-focussed private equity group.

According to The Australian Financial Review, Affinity Equity Partners is close to purchasing the group after beating out rivals Bain Capital and Archer Capital to hold exclusive talks with current majority owner The Riverside Company.

Riverside, a US-based private equity firm, purchased 70 per cent of Retail Zoo for $65 million in 2009 and is likely to at least double its money when it offloads its stake in the group now valued at over $200 million.

Boost founders Jeff and Janine Allis, who control the bulk of the remaining 30 per cent in the company, may also sell, though their position is not clear. Both remain on the board of the company.

If a deal is struck it would represent the first Australian buy for Affinity since it acquired smallgoods group Primo Group Holdings in 2011. It has also been active with purchases of financial planning company IPAC Securities (2001), packaging hire company Loscam (2003) and, most famously, the buyout of Colorado Group (2006).

The latter was a disaster, with the clothing and footwear group entering receivership under the burden of heavy debts in 2011.

Retail Zoo, which also owns the Cibo Espresso and Salsa’s Fresh Mex Grill franchises, is being advised by UBS on the sale.

Warrnambool Cheese & Butter, Saputo, Kirin Holdings, Bega Cheese, Parmalat, Harvey Fresh, Fonterra

The deadline for Saputo’s bid for Warrnambool Cheese & Butter is just one day away and there’s still no sign of an extension. Expect some news on that front today, with Saputo widely expected to stretch its offer deadline by a fortnight.

The Canadian dairy giant is working hard to convince major shareholders Kirin Holdings and Bega Cheese to sell their stakes, though is finding that task challenging right now. While Bega has indicated a desire to sell, it has yet to decide who it will sell to. Meanwhile, Kirin told Business Spectator’s DataRoom yesterday that it had no plans to sell its 9.9 per cent stake at this stage.

As we have discussed on several occasions, the dairy consolidation goes far beyond the fight for WCB. There have also been indications that United Dairy Power could offload part of its business, WA-based Harvey Fresh is considered likely to be in the sights of Parmalat and Bega Cheese is tipped to be the next target once the WCB battle is sorted.

In relation to the latter, the AFR has reported that Fonterra, which holds just shy of 10 per cent of Bega stock, could make a bid for Bega.

When the NZ dairy firm bought into Bega last year it said it was just looking to claim a seat at the table should any bidder emerge, but there are now suggestions it has been open about a desire to acquire Bega in conversation with some investors.

Nothing Bega or Fonterra have publically said suggest a merger is imminent, but it would be a logical consolidation move for Fonterra.

If it does make a play though, there might be plenty of other suitors ready to tip their hats into the ring.

It will be worth watching the share price of Bega today to assess whether the market is reading much into the reports. The company’s shares are already at a level where a takeover premium has been partly priced in.

ANZ Banking Group, Wing Hang Bank

It appears clear that ANZ Banking Group has once again lost out in an attempt to gain a foothold in the lucrative Hong Kong banking sector.

Last year ANZ was rumoured to be one of two banks chasing Hong Kong’s Wing Hang Bank but speculation it dropped out of the race has now been confirmed with Wing Hang entering into exclusive talks with Singapore-based OCBC.

The deal is likely to be worth upwards of $5 billion, with ANZ likely to have baulked at the asking price, which will be above two times book value.

It is the second time an approach for a Hong Kong bank by ANZ has come to nothing in recent years, with the Australian banking giant also shying away from Wing Lung in 2008 on the view the asking price was too high.

Hong Kong banks are highly sought after due to their position as a stepping stone to China and their potential to capitalise on the growing international use of the yuan.

However, there are few available banking assets in the financial centre of much value left after a wave of acquisitions in recent years, making bidding particularly heated.

Oz Minerals, Sandfire Resources

It had long been expected that Oz Minerals would one day bid for fellow copper miner Sandfire Resources, but with Oz struggling in the past twelve months, the shoe has now been placed on the other foot.

Over the past months, as Sandfire has overtaken Oz’s valuation, analysts have begun to speculate that it could indeed be Sandfire that one day acquires Oz Minerals. But Sandfire boss Karl Simich has again tempered such expectation.

“The best thing we could do at the moment is find more of what we have got, organic growth rather than an acquisition for an acquisition’s sake,” he told the AFR, adding that the value of Oz to the company was not clear.

“At the moment you have an asset in the last period of time that has been significantly drawing on cash – the question going forward is will it make money going forward? We need to know the value of Prominent Hill.”

A takeover would be a bold move given Sandfire’s market capitilisation, at $1 billion, is only $50 million above that of Oz Minerals.

Oz retains a 19.9 per cent stake in Sandfire, which has recently been the subject of plenty of speculation for a block trade. Simich again reiterated Sandfire’s desire to assist with such a sale for the purposes of removing an overhang on its stock price.

With almost a fifth of the company considered likely to be offloaded, many potential investors are sitting on the sidelines.

Royal Dutch Shell

Speculation continues to swirl around the Australian petrol retail and refining business of Royal Dutch Shell, with the make-up of the three rival bidders becoming clear.

It appears that all three bids will come as part of a consortium, with the AFR reporting that a deal may be sealed next week.

One consortium includes private equity group TPG, Canada’s Ontario Teachers’ Pension Plan the Kuwait Investment Authority, while another houses the world’s largest oil trader, Vitol, and the Abu Dhabi Investment Council.

The final joint venture bidder is believed to be Australia’s Macquarie Group, in combination with Thai energy firm PTT.

With so much financial firepower in the ranks of the bidders it’s hard to pick a likely victor, other than Shell, which should receive a healthy price for its assets.

It is believed the Geelong refinery and the company’s network of petrol stations will sell for around $3 billion, with the retail outlets the main game for the bidders.

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