DataRoom AM: TPG top-up

Investors are pleased TPG finally sealed the deal on acquiring AAPT, while Amcor and Brambles get ticks of approval for their respective demergers.

The long-running saga over whether a takeover could be sealed for AAPT Telecommunications has finally ended with TPG Telecom announcing the purchase from Telecom New Zealand yesterday. While it may be the final chapter in a troubled buy for Telecom NZ, investors see it as the start of a positive period for TPG.

Elsewhere, demergers are the order of the day with Amcor and Brambles cleared for their splits and Metcash set to pursue a split of its own. Meanwhile, the IPO market fatigue talk is again dampened and Lion Nathan distances itself from reports of a sale of the dairy assets of its subsidiary, National Foods.

TPG Telecom, iiNet, AAPT Telecommunications, Telecom New Zealand

TPG Telecom has put an exclamation point on the on-again, off-again sale of AAPT Telecommunications, paying $450 million to purchase the Australian subsidiary of Telecom New Zealand.

It has been a drawn-out, five-year process for Telecom NZ to rid itself of a disappointing acquisition, which never delivered the earnings expected of a company bought for over $2 billion around the turn of the century.

While it will be glad to have exited at a price slightly above analyst valuations, TPG Telecom can also be pleased with the deal. Investors were definitely supportive, sending TPG securities close to record highs with a 13 per cent lift yesterday.

TPG, the number three internet provider in the country, has now become of the country’s largest owners of broadband infrastructure.

The deal is seen as crucial to the grand plans of TPG boss, and major shareholder, David Teoh who is hoping to connect 500,000 apartments in the nation’s biggest cities with a fibre optic network that could rival the speeds of the national broadband network.

TPG had long been the frontrunner for the deal after reportedly coming close to buying at around $400 million in 2010. On this occasion it sealed a deal after raising its offer from $410 million to $450 million, according to The Australian.

This blew the bids of iiNet and a Canadian pension fund out of the water, with the other bidders reportedly unwilling to pursue a deal greater than $370 million.

It is the first significant purchase from TPG since 2010 when it acquired PIPE Networks for $373 million.

Importantly it is a victory for the company after it lost out to iiNet for AAPT’s consumer arm, which sold for $60 million in 2010, and to Ontario Teachers’ Pension Plan for Leighton Holdings’ telecommunications business this year. Both of those firms – iiNet and OTTP – were outbid by TPG for AAPT.

The deal is not conditional and is expected to close by the end of February next year.

Amcor, Brambles, Metcash

Demergers are the flavour of the week with Brambles and Amcor yesterday receiving approval to go ahead with plans to split their businesses in two.

Shareholders yesterday voted overwhelmingly in favour of Amcor’s plan to spin off its packaging distribution company under the name of Orora.

A staggering 99.79 per cent of votes were cast in favour of the move, which is not surprising given the performance of demerged businesses is usually improved in the immediate aftermath.

The notion of the sum of its parts being greater than the whole plays true, with investors apparently not recognising value until its right in front of their faces.

The demerger will take effect next Tuesday with Orora securities to start trading on the ASX the following day.

Brambles, meanwhile, is slightly ahead of Amcor in its process to separate document storage division, Recall. The demerged business will begin its life on the ASX today after the Federal Court gave it the all clear yesterday on the back of an earlier vote of support from shareholders.

Recall was up for auction last year but a deal around the $2 billion mark could not be achieved, with a $1 billion-plus demerger pursued in its place.

Brambles shareholders will receive one Recall share for every five Brambles securities they own.

Meanwhile, retailer Metcash has announced plans to separate its supermarket business from its convenience store operations just 18 months after merging the two together.

The operator of IGA supermarkets has found the going tough as Coles, Woolworths and Aldi all scrap for market share, often at its expense. It hopes that the reversal of last year’s move will refocus the business, and investors offered a signal of support by sending Metcash shares 4 per cent higher yesterday.

They might not be so supportive should a merger reoccur in the next couple of years.

IPO market, Vocation, ingogo

The successful $250 million float of education group Vocation has highlighted the IPO market is not yet at breaking point.

Concerns were raised about fatigue hitting new floats on the back of the lacklustre debuts of Dick Smith Holdings and Nine Entertainment last week, but a gain of over 7 per cent for Vocation in its first trading day yesterday again cast those fears aside.

As we suggested in this column yesterday, the listings of Nine and Dick Smith were not the cream of the crop and offered a distorted picture of the market. Instead, the December floats of Vocation, Pact Group and Cover-More provide a real guide. The latter two are expected to hit ASX boards before Christmas and their debuts are worth keeping a close eye on.

The Vocation debut, meanwhile, was made more impressive by the fact the bookbuild was completed at the top of the indicative price range.

Elsewhere, taxi-booking app ingogo may list next year, according to the Australian Financial Review. The up-and-coming Sydney-based group run by the founder of Moshtix, Hamish Petrie, has reportedly secured $3.4 million worth of funding from UBS and private equity groups, which values the group at $25 million.

The funding follows a $1 million raising in August and it has now secured over $7 million from several high profile investors including MYOB co-founder Brad Shofer.

Meanwhile, private equity firm Ironbridge is mulling a float of fertility business Healthbridge, according to the AFR.

The report suggests a $500 million listing can be expected in the back half of next year.

Lion Nathan, National Foods, Warrnambool Cheese & Butter

Kirin Holdings-owned Lion Nathan has ruled out a sale of the dairy business of subsidiary National Foods. A $1 billion-plus sale has been rumoured in light of the frantic action in the dairy sector, but Lion chief Stuart Irvine nipped speculation in the bud yesterday.

Irvine said the company’s purchase of 10 per cent in Warrnambool Cheese & Butter was a show of how keenly it wanted to maintain its WCB relationship rather than an indication it was hoping to sure up the business ahead of a trade sale.

Irvine said he was happy with the current stake held in WCB, with the company keeping its cards close to its chest regarding its preferred bidder.

Meanwhile, WCB suitor Murray Goulburn Co-operative has received a dose of good news with suggestions its Australian Competition Tribunal case could be completed by the end of February.

Murray Goulburn has gone directly to the tribunal to seek regulatory approval for its WCB bid and there were fears the process could drag on for six months, but it appears it may be well within that timeframe. Still, it would rather a slow decision in its favour than a speedy resolution against it.

Doubt still surrounds Murray’s ability to can convince the tribunal of the worth of an Australian ‘dairy champion’.

Wrapping up

Another significant block trade could be on the radars of investment bankers, with Sandfire Resources boss Karl Simich suggesting the company’s two biggest shareholders may be looking for an out over the next 12 months. Australia’s Oz Minerals, with 19 per cent, and South Korea’s Posco, with 15 per cent, could be sellers Simich said as they focus on other parts of their businesses, according to The Age.

The company reportedly has several investors keen to get their hands on a significant stake but the opportunity has not been available.

So far this year a number of large block trades, including Fortescue Metals Group, Australand and Aurizon, have been completed with a minimum of fuss.

Finally, Morningside Private Investors has put ANZ Terminals on the auction block, according to the AFR. ANZ Terminals, which offers storage at ports in Australia and New Zealand, may fetch around $500 million.

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