DataRoom AM: Privatisation potential

Government assets could be shopped around if the Commission of Audit recommendations take hold, while a wave of IPOs hit and miss with investors.

A steady stream of government assets have come on the market over the past few years, though the federal government has largely lagged its state counterparts. That may be set to change, however, if Commission of Audit recommendations are implemented -- but that’s a big if.

Elsewhere, the suddenly surging IPO market receives mixed news, New Forests hints at a buying spree and Karoon Gas’ latest capital raising highlights a staggering downturn in its fortunes.

Yesterday’s Commission of Audit report has certainly created plenty of buzz, but history tells us politicians will opt for the safety of doing nothing when it comes to the more controversial recommendations. This means suggestions to sell Snowy Hydro, Australia Post and the Royal Australian Mint will likely get a wide berth, while a divestment of NBN Co seems at least a decade away.

However, the Abbott government will undoubtedly choose to pursue more privatisations beyond Medibank Private before its first term ends, with Defence Housing Australia perhaps the most likely candidate. Australian Hearing Services and naval vessel maker ASC -- which were grouped with Defence Housing and Snowy Hydro as short-term divestment options -- could also be hived off.

The problem for the government is the politically feasible asset sales are also the ones that few buyers would want to chase.

In the IPO market, Acorn Capital has tempered recent positivity, with its new retail investment fund slumping 7 per cent at the end of its first day on ASX boards. The micro-cap fund manager raised $50.8 million through the float of Acorn Capital Investment Fund, with Baillieu Holst, Bell Potter and TC Corporate serving as lead advisors. Its weak start partially offsets a strong fortnight during which Beacon Lighting, Japara Healthcare and Genesis Energy have all performed strongly upon listing.

Meanwhile, baby food company Tasmanian Pure Foods is gearing up for an IPO worth $95m, according to The Australian Financial Review. The owner of Bellamy’s Organic is seeking to capitalise on a wave of interest in Australia’s food sector, with the funds raised to assist with further expansion in China.

In energy, Karoon Gas has called on Morgan Stanley and UBS to manage a $200m capital raising, the AFR reports. It is the second time the WA-focused firm has gone cap-in-hand to investors in nine months, having tapped the market for $150m in August last year. This time, however, the company is trading at less than half the price it was back then and is scarcely worth three times more than what it is seeking to raise.

Elsewhere, New Forests has outlined $5 billion worth of acquisition opportunities in Australia and New Zealand over the next five years just days after wrapping up a $330m purchase of Gunns’ timber assets. While it would be unlikely to capture all the targets on its radar, it’s clear the Sydney-based firm’s shopping spree is just getting started.

In financial services, share registry and transfer agent Computershare has paid $40m to purchase US firm Registrar and Transfer Company. The name of the takeover target and the size of the deal hardly inspire excitement, but small bolt-on deals appear the smartest way for Computershare to expand its reach.

Finally, Bakers Delight has revealed it spurned a takeover offer two months ago without ever finding out the price its unnamed suitor was willing to stump up.