DataRoom AM: Nabbing the opportunity

Fitch makes a strong case for NAB to sell its UK assets, while intrigue still surrounds Murray Goulburn and Kirin's stakes in WCB.

National Australia Bank’s UK plans have again drawn the spotlight, this time by ratings agency Fitch. Could the exit door for NAB’s long-time laggard finally be opening?

Elsewhere, a few question marks remain as Saputo wraps up control of Warrnambool Cheese and Butter, the IPO market receives a welcome boost, Macquarie Group remains in the running for JPMorgan Chase’s $2 billion physical commodities business and Echo Entertainment Group edges closer to a sale of its Townsville casino.

National Australia Bank, Clydesdale Bank

National Australia Bank’s UK assets, long discussed as a prime divestment option, have been put on the agenda again, this time by a credit ratings agency.

Fitch, upon affirming the credit rating NAB-owned Clydesdale Bank, hinted it factored in the likelihood of a sale into its deliberations.

“The bank's IDRs (issuer default ratings) reflect Fitch's belief that there is a high probability of support from [Clydesdale’s] 100 per cent parent National Australia Bank, if required, based on demonstrated support over the past three years... This is despite its limited strategic importance to NAB in Fitch's view, given its fairly small size in relation to the group and own branding in a non-core geography,” Fitch said in a statement.

The ratings agency added that comments from NAB suggested a sale could be expected, though the bank won’t reduce its commitment to Clydesdale in the meantime.

“NAB has stated that it is likely to sell CB in the medium-term,” Fitch noted. “The two-notch difference between CB's and NAB's IDR reflects its low strategic importance, but also Fitch's view that support will continue to be provided until a buyer is found.”

It is the second time this year that Clydesdale has been put on the agenda, with analysts from JPMorgan and Macquarie Bank both outlining strong cases for divestment earlier this month.

For its part, NAB has said it will weigh a spin-off should the UK government’s sale of part of its 33 per cent of Lloyds Banking Group be well received. That sale could begin as early as February, meaning we could have some movement on Clydesdale in the next few months.

The strengthening UK economy, highlighted by news overnight that the region’s jobless rate hit a five-year low, makes it a reasonable time to sell what has been a long-term drag on return on NAB’s equity.

Saputo, Warrnambool Cheese and Butter, Murray Goulburn

The $500 million race for control of Warrnambool Cheese and Butter is over after Saputo yesterday confirmed its shareholding had climbed above 50 per cent.

A bit of intrigue persists, largely surrounding the stakes still held by rival suitor Murray Goulburn and WCB customer Lion Nathan, a subsidiary of Japan’s Kirin Holdings. The former retains 18.8 per cent of the WCB business while the latter clings to 10.2 per cent.

Murray is widely expected to fold its cards shortly and cash in a profit of around $50 million. If it does, the shareholding of Saputo will likely nudge 75 per cent in the next week, meaning its offer will rise to $9.40.

The Canadian group’s deal jumped to $9.20 a share after reaching 50 per cent acceptances yesterday and could climb as high as $9.60 a share should it receive 90 per cent acceptances in the next fortnight.

There is no chance of that unless Kirin comes to the party with Murray Goulburn.The Australian reports that talks between the two firms may have soured in recent days. Still, it would be a surprise if Saputo and Kirin couldn’t reach an agreement in the near-term.

WCB shares closed at $9.42 yesterday in a sign investors believe Saputo hitting the 75 per cent acceptances mark is a sure bet. It also seems many are confident Murray Goulburn and Kirin will assist the Canadian group in reaching the seemingly elusive 90 per cent mark.

iSentia, I-Med Network, Nine Entertainment

While new floats remain thin on the ground in 2014, there has been some good news for the IPO market in the form of the highest profile float of 2013 finally clearing its listing price.

Nine Entertainment surpassed its $2.05 listing price for the first time earlier this week, over a month after it had a disappointing first day back on the ASX. After yesterday’s moves it is now almost 5 per cent above the listing price on positive broker coverage and a successful summer ratings season, led by strong viewer numbers for its coverage of The Ashes.

Regardless of why it has found favour with investors, it is great news for investment banks trying to sell the worth of an IPO. Two more companies may soon be willing to test the waters, with I-MED Network and iSentia both running the numbers on a float.

iSentia will be the first to hit markets, with the media monitoring business seen beginning a roadshow yesterday.

According to The Australian, the private equity-owned iSentia, formerly known as Media Monitors, has not yet committed to a float of up to $500 million. However, a decision in the affirmative is expected soon.

Meanwhile, the nation’s largest radiology provider, I-MED Network, is tipped for a return to the ASX this year as it continues its recovery from a near-death experience around the time of the GFC.

After sealing a new $240 million debt facility with the Commonwealth Bank of Australia, ANZ Banking Group and Morgan Stanley last month, The Australian reports that the company’s owners are shifting their focus to exit opportunities.

This may involve either a trade sale or a float of the business, which could expect to receive a valuation above $600 million.

JP Morgan Chase, Macquarie Group

The auction of JPMorgan Chase’s $US2 billion ($A2.23 billion) physical commodities business is nearing an end, with Australia’s Macquarie Group one of three left in the race.

According to AMM, final bids are due this week, with a deal expected soon after.

Macquarie will battle private equity firm Blackstone Group and Swiss-based trading group Mercuria Energy in the sales process. There is no clear frontrunner yet.

Macquarie has been looking to expand its commodities business of late and has recently been linked to the sale of Goldman Sachs’ uranium desk, but its rival suitors present have pockets deep enough to make it a close race.

Echo Entertainment Group

Echo Entertainment Group will announce the sale of its Jupiters Townsville casino in the coming week, according to the Australian Financial Review.

The Courier-Mail divulged plans for a sale in October last year, with the casino tipped to fetch $75 million. Singapore’s Lasseters is seen as one possible buyer, though an unnamed local buyer is reportedly the current frontrunner.

Cash reaped from the auction of Echo’s smallest property is likely to be directed toward protecting its monopoly in Brisbane, with the Queensland government currently running a tender process for a new casino in the city.

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