DataRoom AM: QBE critique

QBE’s troubled US operations are under review, with its mid-market business in the region a likely casualty. A divestment of the business may recoup $750 million, but shareholders are less than impressed.

Elsewhere, a prominent Qantas Airways shareholder backs a partial sale of its frequent flyer division, the government considers another billion-dollar privatisation and Frank Lowy receives some welcome good news on the planned restructure of commercial property giant Westfield.

Insurance giant QBE has confirmed it is undertaking a review of its US operations after The Insurance Insider posted a report suggesting its mid-market business Winterthur was on the block.

The ASX-listed firm purchased Winterthur at the start of 2007 for $US1.16 billion ($A1.23bn), but that was ahead of the financial crisis and the business has been split since. At the time of the purchase Winterthur had about $US1.45bn in gross written premiums, but today that number is close to $US900m. It likely leaves QBE chasing a sale price of about $US700m to $US750m.

Often news of divestments of underperforming assets has investors grinning, but on this occasion shareholders sent QBE’s stock 4 per cent lower.

Meanwhile, the federal government’s privatisation plans may go far beyond Medibank Private, with reports a sale of the Australian Security and Investments Commission’s corporate register is on the agenda. The deal, which involves the regulator’s register of company directors, company names, auditors, liquidators and ­credit representatives, could reap $1bn for the government. Private sector registries and financial market operators are considered among the most likely suitors.

In aviation, debate surrounding a possible sale or float of Qantas Airways’ frequent flyer division has been reignited, this time by BT Investment Management. The fund manager, which recently saw its Qantas stake fall below 5 per cent, said the troubled airline needed to “strongly consider” the option of a partial sale, according to The Australian Financial Review.

As mentioned in this column previously, the growing frequent flyer division could easily be worth over $3.5bn -- substantially higher than Qantas’ $2.5bn market cap, meaning Qantas’ hopes to extract full value from a partial divestment would be hard to realise. The problem is underestimated.

Separate reports from two independent experts have both backed the bold restructure of Westfield Group and Westfield Retail Trust. Arguing the move is in the best interest of shareholders, both KPMG and Grant Samuel mounted a case for one of the greatest shake-ups in Australian corporate history. It brings much needed momentum to Frank Lowy’s plans ahead of a planned shareholder vote on May 29.

Also in property, the number of bidders for UGL’s property services arm DTZ is thinning, according to the AFR, with TPG and Warburg Pincus remaining at the head of the pack. Still, it appears a trade sale worth up to $1.4bn may now be a better bet than a float.

Finally, private equity firm Next Capital will decide next month whether it will proceed with plans to list New Zealand hire equipment company Hirepool, while intellectual property law firm Spruson & Ferguson is believed to be mulling a listing of its own that could value the group at over $200m, according to the AFR.