DataRoom AM: Private post

Comments from the head of the competition watchdog have stirred speculation about a privatisation of Australia Post. While too much was read into Rod Sims’ remarks, the dire state of the federal budget will eventually force the government to weigh-up a divestment – just not this year.

Elsewhere, Dexus appears set to win the battle for the Commonwealth Bank of Australia’s office landlord, BP and Royal Dutch Shell mull an Australian exit, SG Fleet could be the first major float of 2014 and United Dairy Power confirms plans to offload part of its business.

Australian Competition and Consumer Commission, Australia Post

When the head of the nation’s competition watchdog says something about the productivity of government assets, those comments can have something of a snowball effect. And so it was yesterday as remarks from Australian Competition and Consumer Commission head Rod Sims about private versus public ownership of assets took on a life of their own.

Sims’ comments, published in The Australian Financial Review, saw a spokesperson for federal communications minister Malcolm Turnbull deny Australia Post was up for sale, led the federal opposition to call for clarification from the government and created a stir among unions.

Given the headline – ‘ACCC calls for big asset sell-off’ – it’s easy to see why the statements created such strong reactions. That headline spread like wildfire across several business publications, including Business Spectator, and can be put down to the first sentence of the AFR piece, which read:

“The national competition regulator has urged Prime Minister Tony Abbott to sell off assets such as Australia Post and Medibank Private and push for the privatisation of state-owned energy companies.”

The problem is Sims never said anything specific about Australia Post or Medibank Private. The closest he came to doing so was this quote:

“I strongly believe that the private sector owning commercial assets will bring about a lot more productive use of the assets than government ownership of the assets,” Rod Sims said.

The watchdog confirmed yesterday afternoon that while Sims held the general view that the private sector runs commercial enterprises more efficiently than government, “there was no reference made to privatise any specific Commonwealth-owned entity.”

The upshot of all the action was essentially nothing, but it has restarted the conversation on whether Australia Post should be put on the market. For now, however, Medibank Private will be the first cab off the rank, with a multi-billion dollar trade sale or IPO likely in the fourth quarter of this year or early in 2015.

Meanwhile, Australia Post, the more complicated privatisation option of the two due to its loss-making letters business, will wait for another day. Turnbull and transport minister Warren Truss have dismissed it as a divestment option on several occasions, but the National Commission of Audit and competition policy review may lead to a change of view for the government.

Those reviews, and the budget troubles, will likely see the government at least pursue a scoping study at some point in the next couple of years.

It will be met with concern from the Nationals, however, who will be worried that a new owner(s) will cripple services to the bush in a bid to turn around the fortunes of the legacy letters business.

Dexus Property Group, GPT Group, Commonwealth Property Office Fund

The race to become Australia’s largest office landlord appears likely to be won by Dexus Property Group.

While the hard fought battle for Commonwealth Property Office Fund is not yet over, Dexus has reached an agreement with rival bidder GPT Group to offload over $1 billion worth of properties to GPT should Dexus reach 90 per cent acceptances.

The memorandum of understanding, struck last night, has not led GPT to drop its bid though that may be a mere formality.

Dexus, which has also increased the cash component of its bid at the expense of scrip of a similar value, kick-started the bidding process with joint venture partner Canada Pension Plan Investment Board back in October.

After GPT entered the race in November a revised offer from the Dexus-led JV saw it claim the backing of the independent board of CPA in December.

The Dexus offer is due to close on February 7, while GPT’s is due to close on January 24.

BP, Royal Dutch Shell

Rumours of an exit of Royal Dutch Shell and BP from their petrol station businesses in Australia continue to surface.

This time the AFR has said Shell is in “preliminary” discussions with a major private equity firm and a consortium that includes Macquarie Group to offload its Geelong refinery and network of petrol stations around the country.

The deal could be worth around $3 billion, according to the report, and comes amid continued speculation that Shell will soon rid itself of its $7.5 billion stake in Woodside Petroleum.

Shell’s refinery in Geelong was put on the market back in April last year, but it has yet to publically outline any divestment plans for its petrol stations, which have an agreement with Coles supermarkets.

The AFR report said BP was likely looking for around $3 billion for its petrol stations, while US giant Chevron could be mulling a multi-billion dollar divestment of its 50 per cent stake in petrol station owner Caltex Australia.

If all those dominoes fall then it will represent a dramatic overhaul of the local petrol sector. However, if three big players like BP, Shell and Chevron are all seeking the exit door at the same time, there is reason to be sceptical on buyer demand.

Are there enough buyers out there to mop up the assets of all three at prices the companies are willing to accept?

Champ Ventures, SG Fleet, IPO market, Valence Industries

Champ Ventures is looking to kick-start the IPO market in 2014 with a possible $500 million listing of fleet management company SG Fleet, according to the AFR.

The report noted the private equity firm had hired Goldman Sachs and Morgan Stanley as joint lead managers for the float, which would see Champ sell off the 42 per cent stake it acquired in 2011.

Majority owner Super Group confirmed overnight that Champ was weighing the sale of its shareholding. The statement from Super added that it planned to retain its majority holding in the firm.

Meanwhile, the first IPO of the year has gone off without a hitch. Graphite miner Valence Industries closed flat at 20 cents a share after earlier climbing as high as 22 cents.

The company had raised just shy of $7 million through its float and performed quite well on its first day given mining juniors are far from being flavour of the month.

United Dairy Power, Warrnambool Cheese and Butter

Privately owned milk supplier United Dairy Power has confirmed plans to offload part of its business, though it has distanced itself from speculation China-owned Manassen Foods is a frontrunner in the race.

“We wish to remain Australian owned,” United Dairy Power’s general manager Darryl Cardona told Business Spectator’s DataRoom.

“We’ve had different approaches by different companies over the years,” he added, while denying speculation Manassen was one such business.

Meanwhile, news on the takeover chase for Warrnambool Cheese & Butter can be expected later this week as Saputo’s offer deadline nears.