DataRoom AM: Merger backburner?

The IPO market has received a none-too-subtle hint from Wilson Asset Management that the joy of 2013 may be short-lived. The current float pipeline is long, but perhaps the backburner is about to get a workout.

Elsewhere, two more companies join the list of IPO hopefuls, M2 Telecommunications Group outlines its M&A plans and Nestle offloads a major Australian brand.

Wilson Asset Management has signalled a more challenging 2014 for the IPO market after a hot end to 2013. The ASX-listed group warned yesterday that global market turbulence and the ‘patchiness’ of the local economy will require investment banks to temper their expectations for a bumper 2014.

Float forecasts for 2014 have topped $10 billion in some circles amid hopes we could see billion dollar-plus listings of Healthscope Group, Medibank Private, Qantas Airways’ Frequent Flyer division and Spotless Group.

A total of 77 companies listed on the Australian Securities Exchange in the final six months of 2013, but there were several disappointments despite the market’s overall strength.

Speaking of the IPO market, fledgling childcare group Sterling Early Education is seen joining the float queue, with a June quarter listing worth around $200 million in the works, according to the Australian Financial Review. Sterling was founded in November last year and hopes to cash in on interest in the likes of G8 Education and Affinity Education.

Meanwhile, Smartgroup, the owner of salary packaging firm Smartsalary, is gearing up for a June quarter listing of its own. According to the AFR, Smartgroup is meeting with fund managers this week to test interest in an IPO worth between $200 and $250 million.

Macquarie Capital has been called in as a lead advisor for the floats of both Sterling and Smartgroup.

M2 Telecommunications Group has highlighted an acquisitive streak that should see it expand on recent purchases. M2’s chief executive Geoff Horth told the AFR there were a “number of telco stocks” on his radar along with smaller energy companies that could assist M2 strengthen its energy portfolio.

M2 completed the purchases of local rivals Dodo Australia and Eftel Ltd for $242 million last year and spent $192 million on Primus Telecommunications in 2012.

Nestle, the world’s largest food group, is pushing ahead with plans to slim down its operations, announcing it will sell the PowerBar and Musashi brands to US-based Post Holdings. Musashi was founded in Australia in 1987 and is one of the nation’s largest sports nutrition brands. Nestle’s decision to sell for an undisclosed amount comes nine years after it bought the brand.

Finally, ASX-listed Reece has finalised the purchase of refrigeration and air-conditioning parts firm Actrol. The $280-million deal will see Reece claim control from private equity firm Catalyst Investment Managers.