DataRoom AM: Watching Westpac

Westpac appears to have made its biggest buy in five years, but the ACCC could yet play spoiler. The IPO sector, meanwhile, gets a further shot in the arm through high demand for the float of OzForex. Elsewhere, McAleese pushes its IPO date back, there are ructions within the Coalition over the GrainCorp takeover and Virgin says ‘yes’ to Optus despite a recent glitch in their relationship.

Westpac, Macquarie, Lloyds

Westpac has come out on top in the race for Lloyds’ Australian loan book, according to various media reports. The bank was the last one standing after four bidders – Westpac, Macquarie Group, Pepper Australia and ANZ – were shortlisted over a month ago.

Westpac had always been considered the frontrunner, largely due to its car loans business, which provided it with the best synergies. Reports early yesterday, however, suggested Macquarie might have offered a higher bid than the one put forward by Westpac – rumoured to be $2.1 billion by Bloomberg. If so, the Macquarie proposal may have been thwarted by a plan to exclude some of the loans on offer. Lloyds, it seems, was keen to package everything together.

For Westpac it represents its first real splurge since the massive $18.5 billion takeover of St George Bank in 2008. That purchase effectively ruled it out of the M&A market for a few years and it has only really come back to the bidding table in a meaningful way over the past twelve months.

Late last year the company made an ultimately unsuccessful bid to gain a footprint in the Asian market through a $400 million purchase of 5 per cent in Hong Kong’s Bank of East Asia. While it was outbid by Japan’s Sumitomo Mitsui, it was a rare signal of offshore intent.

Those offshore ambitions may now be tempered in the short term as it sorts to integrate the Lloyds assets.

Meanwhile, the Australian Competition and Consumer Commission could still stand in the way of Westpac, with chairman Rod Sims yesterday hinting the watchdog will run a close eye over the Lloyds deal.

"We don't have much information now but we do know that Lloyds (has) a business that finances floor plans, motor vehicle dealers and it has point-of-sale vehicle financing,” Sims said, according to The Australian. "Both Westpac and Macquarie are also in that business and we know it's a reasonably concentrated market."

One suspects that Lloyds’ struggles in the Australian market may help the deal clear the regulatory hurdle.

OzForex, McAleese

As expected the bookbuild for the float of OzForex attracted plenty of interest ahead of what looks like being a strong opening day on Friday. The lead managers of the listing, Macquarie and Goldman Sachs, were yesterday allocating 219.7 million shares at a price of $2, which gives the IPO a value of $439.4 million.

The heavily oversubscribed float is a further sign the IPO market is strengthening ahead of listings by Meridian Energy, Nine Entertainment, McAleese and possibly Dick Smith, Spotless and Pact Group as well.

Speaking of McAleese, the transport company has delayed its float after a tragic incident involving one of its fleet last week. The fatal truck explosion in Sydney that killed two people has led to wider safety concerns about the Cootes Transport fleet, which is owned by McAleese.

Expect the float to be pushed back until after Christmas.

Archer Daniels Midland, GrainCorp

Coalition tension is bubbling over the proposed $3 billion plus takeover of GrainCorp by Archer Daniels Midland. Ahead of a Foreign Investment Review Board decision and a consequent verdict from the treasurer, Senator Bill Heffernan has again attacked the proposal.

Heffernan, who headed a rural and regional affairs Senate committee critical of the deal earlier this year, has now put forward plans to reform the committee and call new witnesses, including ACCC chair Rod Sims.

There comes a point, however, where one has to ask: is this committee a waste taxpayer-funded resources? The last committee on the matter concluded there needs to be an independent review of the independent review carried out by the ACCC. It offered little to the debate and meant nothing.

The question of whether we are too impatient with our agricultural assets and have no idea how to value them is a pertinent one, but this isn’t the way to go about asking it.

Regardless, the news is another hint of the test ahead for Joe Hockey who has the likes of Heffernan, agriculture minister Barnaby Joyce and deputy prime minister Warren Truss firmly opposed to the deal.

Virgin Australia, Optus, Telstra

Optus Business has taken over the telecommunications requirements of Virgin Australia from incumbent Telstra via a $60 million, five-year deal.

The domestic and international deal comes despite the airline blaming an Optus router for a technical glitch with its check-in system in July. The problem led to the cancellation and delay of several flights over July 19-20.

Wrapping up

All is definitely not well at Mirabela, with the nickel miner suspending shares while endeavouring to shore up its finances. The company informed shareholders the suspension will last until it delivers yet another company and operational update, which it hopes will be before the end of October. The chances the company will emerge from the suspension intact appear limited in wake of recent events which have seen the exit of one of its two customers and downgrades by ratings agencies S&P and Moody’s.

Also in mining, Oceana Gold chief executive Michael Wilkes has said the company is on the lookout for acquisitions given there are “many smaller companies struggling to raise money.” Although there are many distressed gold miners, Wilkes said his company will only proceed with deals where the operating costs were below $US1050.

Elsewhere, engineering group Worley Parsons has completed a deal to team with global accounting firm Deloitte on major oil & gas, infrastructure and mining projects. The advisory services alignment follows a similar arrangement in Canada, with another in South Africa expected to be signed in the near future.

Finally, the receiver called in over the Redbank power station is confident a restructure or refinancing of the $192.7 million in debt can be arranged quickly. KordaMentha said a sale was not on the table at this point in time.

Redbank Energy, which owns the subsidiary now in the hands of KordaMentha, has entered a suspension while talks continue.