DataRoom AM: Miner scope-out

Plummeting iron ore prices could see increased M&A activity in the mining sector, while Glencore weighs another bid for BHP Billiton’s Nickel West assets.

Iron ore’s ride appears more a haunted house than a roller-coaster at the moment, but it has raised the potential for M&A activity, according to some analysts. Just don’t expect anything too soon.

Elsewhere, Bain Capital takes a big step towards a float of MYOB, Glencore weighs a new play for BHP Billiton’s Nickel West assets and Leighton Holdings sees strong interest in its property assets.

The plunging iron ore price has drawn plenty of ink this week, but attention is now turning to the prospect of M&A activity. At prices around $US70 a tonne, most junior and mid-tier miners are operating at a loss, which leaves them ripe to either collapse or to get taken out. Analysts see BC Iron and Atlas Iron as the most obvious targets, with Mick Davis’s X2 Resources a potential suitor. However, the speed of the iron ore descent will have prospective buyers in no rush to bid.

Should the iron ore price fail to recover any time soon, it may also lift Rio Tinto’s interest in agreeing to a landscape-changing tie-up with Glencore, once a six-month ‘no action’ period breaks in April.

While Glencore waits until April to weigh another bid for Rio, speculation is swirling that the commodities trading heavyweight could make a fresh play for BHP Billiton’s Nickel West assets. According to The Australian Financial Review, Glencore boss Ivan Glasenberg touched down in WA this week and while he may have just been keeping up-to-date with the firm’s local operations, there is an expectation Glencore may raise its rebuffed $200 million Nickel West bid.

In the IPO market, Bain Capital now has the finger firmly on the trigger for an IPO of accounting software giant MYOBcalling on Bank of America Merrill Lynch, Citi, Goldman Sachs and UBS as joint lead managers, while Reunion Capital Partners will serve as an independent financial adviser.

The widely expected blockbuster float could be the largest on the ASX next year, potentially valuing the firm at about $3 billion. It comes just over three years after Bain secured control of MYOB for $1.2bn.

Elsewhere, jewellery retailer Lovisa has met strong demand for its upcoming listing, raising $110m through a bookbuild this week, according to the AFR.

In property, a sale of the Leighton-backed Devine is seen nearing the finishing line after Singapore’s City Developments reportedly lobbed in a higher bid than fellow suitor Proprium Capital Partners. The Singapore firm is also tipped to be leading the race for Leighton Properties, a $500m business that is part of Leighton’s $3bn asset sell-off.

In infrastructure, a storm is brewing over the upcoming asset sales in Queensland as suitors worry about a conflict of interest at Macquarie Group, the AFR reports. Prospective buyers are fretting about special treatment for possible bidder Macquarie Infrastructure and Real Assets given Macquarie Capital is running the sale of electricity and port assets, with an auction protest a possibility.

Meanwhile, Wesfarmers appears keen to further diversify, labelling agriculture investments as its next frontier as rumours persist about a stronger foray into financial services. Despite outlining the agriculture opportunity, Wesfarmers boss Richard Goyder would not be drawn on market speculation pinpointing Elders as a possible target.

In insurance, the Northern Territory is expected to detail a divestment plan for state-owned Territory Insurance Office (TIO) this weekend. Prospective buyers have been tapped, with negotiations over job commitments currently underway.

Finally, Duet Group’s $397m capital raising has met strong demand despite a move by major shareholder Spark to shun the offering, Nine Entertainment has dismissed rumours of a sale of its Ticketek business and US investment firm Southeastern Asset Management has made moves to sell down its 12.7 per cent stake in News Corporation.

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