DataRoom AM: Nine fanfare

Nine’s eagerly anticipated prospectus recalls some similarities to Myer’s float, while investors aren’t quite sure what to make of Billabong’s latest debt deal.

The details for the biggest Australian float of 2013 are filtering in, with Nine Entertainment to list at a value eerily similar to that of Myer a few years ago. Like the famed retailer there is plenty of hype, but does it pose the same risks?

Elsewhere, Billabong shuffles some funds around, Boral’s joint venture with Leighton scores another big contract and Bega Cheese surges to the lead in the race for Warrnambool Cheese and Butter.

Nine Entertainment

The IPO of Nine Entertainment is progressing smoothly, with its prospectus filed on Monday amid much fanfare.

The document reveals the media group is hoping to raise at least $643.3 million, and as much as $697.3 million, through the sale of shares within a $2.05-$2.35 range. This will lead to a market capitalisation of between $1.93 billion and $2.17 billion and an enterprise value of as much as $2.77 billion.

Nine’s float is arguably the most eagerly anticipated on the ASX since Myer four years ago, but investors are hoping the period after its listing will be considerably better.

Myer, of course, had a shocking first day and its initial investors have never seen a price above the $4.10 from the November 2009 book build. Despite the group recovering from its lows under $2, shareholders who bought into the float are still 37 per cent underwater.

Worryingly, there are two glaring similarities between the two floats: majority private equity ownership and involvement in industries facing structural decline.

In 2009 many still didn’t realise that the retail game had changed forever thanks to the introduction of the online competitor. It’s been proven since the Myer float and it’s hard to see the group recovering to its listing price anytime soon.

Nine, meanwhile, is also in a sector that is experiencing drastic changes thanks to online rivals.

Can it withstand the likes of Netflix when they come to town? Can it fight off the cable challenge? Can it reap the same profits from internet users who want to watch their favourite shows when it best suits their schedule?

These are the questions that potential investors will be running through their heads over and over again.

The other issue, private equity exits, is not as large a problem given the two largest shareholders in Nine, Apollo Global Management and Oaktree Capital Group, have pledged to retain their stakes for a year. Oaktree, however, has cut its stake by around 40 per cent by selling into the IPO.

While investors will be pleased Oaktree and Apollo haven’t cut and run as quickly as Myer owner TPG, it may cause an overhang on the stock price if investors feel the two private equity groups are likely to sell out at the first opportunity. And if they do sell in a year’s time, what does that say for the future of the business?

On the surface, at least, Nine is positioned to do markedly better than Myer, but we won’t know whether it’s a success until at least twelve months after its listing date of December 6. We may, however, know if it’s a failure within a week if the Myer example is any guide.

Billabong International

With the all-capped headline of ‘FUNDING-NEW TERM DEBT/BOARD CHANGES/AGM UPDATE/SALE-WEST 49’, it appears Billabong International’s ASX release yesterday was meant to catch the eye.

Investors, however, seemed a tad confused, not sure what to do with the troubled surfwear group’s shares. After wavering up and down all day they closed unchanged from the start of trade.

We start with the end of the long headline, about the sale of the group’s Canadian retail chain, West 49, to YM Inc. The deal has been made for around $10 million with a $34 million, two-year supply agreement to help retain Billabong’s presence in the market.

The move helps the troubled group shore up its balance sheet a little while it refocuses on core markets.

Further boosting the balance sheet is the receipt of a $US300 million ($A315 million) tranche of the six-year senior secured term loan of $US360 million provided by Centerbridge Partners and Oaktree Capital.

These funds, however, have been immediately redirected to pay off the $US294 million bridge loan facility from the Altamont consortium, which was agreed back in July.

Billabong said it was also working with GE Capital on a revolving credit facility of up to $US100 million. It was originally slated to be $US140 million, but the West 49 sale has helped reduce that figure.

Finally, the surfwear group also said it had received approval from ASIC to hold its AGM outside the designated window prior to November 30. With all the goings on at Billabong this year, the December 10 meeting should be very interesting.

Bega Cheese, Warrnambool Cheese and Butter, Saputo, Murray Goulburn

When Saputo lobbed an offer of $8 a share for Warrnambool Cheese and Butter to counter the $7.50 a share proposed by Murray Goulburn, Bega Cheese was more than $1 out of the running and considered the despised outsider.

How quickly things change.

Bega Cheese now has the highest offer for Warrnambool Cheese and Butter and it hasn’t been required to lift a finger. With its shares closing at a record high yesterday of $5.05, Bega’s cash and scrip bid is now worth $8.06. It could yet go higher still with the run on its shares showing little signs of abating.

The Bega board will meet on Thursday to discuss whether to retain or raise the current offer of $2 a share plus 1.2 Bega shares and the option of taking the bid unconditional.

WCB investors still anticipate more action, with the dairy group’s shares climbing to $8.36 yesterday.

Boral Limited, Leighton Holdings

The joint venture between subsidiaries of Leighton Holdings and Boral Limited has scored a big win, claiming a $700 million roads contract.

The JV, which includes Leighton Contractors, Boral Construction Materials and UK-based Amey, was chosen by Roads and Maritime Services New South Wales for a seven-year road asset management contract. The deal is valued at $100 million per annum and, according to the joint venture parties, is one of the largest contracts of its kind in the southern hemisphere.

The deal will see the delivery of improvement and maintenance services for the Sydney South Zone road network and will begin in March 2014.

The deal is the second good result for the JV in a fortnight after it secured a five-year, $135 million road asset management contract with Queensland’s Department of Transport and Main Roads at the end of last month.

IPO market, Vocation, McAleese Transport, GDI Property Group

The on-again, off-again IPO of McAleese Transport could be back on before the end of the year, the AFR reports. The group had been pursuing a $150 million listing in November that would have valued the company at around $450 million. However, the tragic crash of a fuel-tanker within its fleet pushed a float off the table this year, or so we thought.

Meanwhile, tertiary education group Vocation is hoping to raise between $230.5 million and $253.5 million in its December float, according to the AFR, leading to a market cap of around $350 million.

Elsewhere, the book build for the GDI Property Group IPO is slated for November 21 and 22. The group will begin trading on the ASX on December 17 after raising around $550 million, according to the AFR.

Wrapping up

Sonic Healthcare is weighing up a purchase of German pathology group Amedes from private equity group General Atlantic, the Wall Street Journal believes. Goldman Sachs is currently running a sales process that could reap as much as $1.1 billion. Should a deal be reached, it would be the second German acquisition this year for the ASX-listed group though it may have to beat out three other suitors, according to the report.

Offshore, phone maker Blackberry has failed to find a suitable buyer instead pushing forward with a $1 billion cash injection from its largest shareholder, Fairfax Financial, while Twitter has looked to capitalize on recent market strength by raising the value of its stock offering. The social media group is expected to list sometime in the next week.

Finally, the Investa Office Fund has sold its 13.5 per cent holding in the Dutch Office Fund for around $220 million, while Warburg Pincus has officially offloaded its 33.9 per cent stake inTranspacific Industries for $570 million leaving the private equity group with no investments in Australia.