DataRoom AM: Qantas split whispers

Qantas may be moving towards a major split but it won’t be an easy plan to execute, while another suitor has reportedly joined the auction for BHP Billiton's Nickel West assets.

Qantas Airways is just five weeks away from announcing the findings of its closely watched strategic review and speculation on its outcomes has started to swirl once again. This time it’s talk of a split of its business, but it won’t be an easy manoeuvre.

Elsewhere, another contender joins the auction of BHP Billiton’s Nickel West assets, there’s a mass sellout of coal assets in Queensland, Healthscope steps up its push towards an ASX listing, and expectations rise for a Stockland return to the race for Australand.

Qantas Airways is mulling a split of its business along domestic and international lines, Fairfax Media reports. The change, which would follow in the footsteps of Virgin Australia, could encourage significant foreign investment but it is unclear whether the latest changes to the Qantas Sale Act would permit such a move. The rumours come two years after the firm completed an internally separation of the two businesses in 2012, but that change did not create individual investment structures.

Whether it is possible or not, there are two other pressing issues for such a plan: public backlash and lack of interested buyers. A split would undoubtedly stir heated debate around the country, while the most likely candidates for buying into Qantas (Emirates and China Southern) have previously dismissed rumours of interest in a stake in our national carrier.

The airline’s plans should be made clear on August 28, but in the meantime brace for a flurry of speculation.

In Queensland, there’s plenty of action in the struggling coal sector, with Japanese trading houses Itochu and Sumitomo set to exit their stakes in Glencore’s NCA Project, which includes the Newlands and Collinsville mines as well access to the Abbot Point coal port. Itochu and Sumitomo last raised their stakes by 20 per cent in 2003 through a complicated $555m deal, leaving the two firms with combined ownership of 45 per cent.

A sale is sought before year’s end.

It’s not the only action relating to Abbot Point, with India’s Adani Group believed to be planning a divestment of the coal port. An auction could lead to a sale worth about $2 billion, just three years after Adani paid the Queensland government $1.8bn for a 99-year lease on the asset.

Sticking with resources, BHP Billiton’s Nickel West auction, which received a blow last week with the exit of favourite Glencore, has drawn the interest of private equity firm Apollo Global Management, according to The Australian Financial Review. Apollo is considered among a group of six sorting through paperwork on the nickel operations, with Mick Davis’ X2 Resources and commodity trading house Trafigura among the logical contenders.

In the IPO market, Healthscope pushed forward its bookbuild by a day amid expectations of strong demand in the biggest float on the ASX since QR National (now Aurizon) in 2010. The firm is hoping to raise $2.57 billion, with the listing likely to leave current majority owners TPG and The Carlyle Group clinging to a combined stake of 32-40 per cent, according to the AFR.

In property, the fight for Australand may not be over yet, with rumours emerging that former suitor Stockland could re-enter the race. Stockland was outbid by current frontrunner Frasers Centrepoint in June, but CLSA analysts are expecting the ASX-listed group to put in one more push for control of the $2.6bn Australand.

Elsewhere, infrastructure investors are eyeing General Electric’s $1.2 billion Worsley Alumina power plant as the US giant mulls an ASX listing for the WA plant. Tentative offers have reportedly already been forthcoming and the strength of the bids is expected to lead to a trade sale being pursued in preference to a float. Australian SuperDuetAPA and Envestra have been listed as prospective buyers.

Finally, the Queensland government has called for advisers to declare their interest in managing asset sales worth over $30bn, while Antares Energy has staved off a bid from activist fund Lone Star to take control of its board. 

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