DataRoom AM: Wesfarmers spin-off?

Wesfarmers may announce a float of its insurance broking business, while Burson Automotive is also tipped for an IPO.

Is Wesfarmers about to flog its second insurance-related business in three months? We could find out about an IPO as soon as this morning. Quadrant Private Equity is also thinking about floats, with Burson Automotive on the starting grid.

Meanwhile, Malcolm Turnbull has put media ownership back on the legislative agenda, Goldman Sachs is getting a nickel or two out of BHP Billiton and GrainCorp won’t let us forget about Archer Daniels Midland.

Wesfarmers could announce as early as this morning that it’s planning to float its $1.12 billion insurance broking business on the ASX via an initial public offering.

The Weekend Australian reports that Wesfarmers’ part-owned investment bank Gresham is advising, while Macquarie and JPMorgan are believed to be favourites for lead manager gigs.

It’s likely that such a float, if it proceeds, would be one of the largest from corporate Australia in 2014. It will also raise questions about the long-term strategic reasoning behind Wesfarmers’ conglomerate structure.

However, market rumours have also recently pointed to Wesfarmers doing something with Orica’s non-mining chemicals division. With its insurance underwriting business already hived off to Insurance Australia Group for $1.85bn, Richard Goyder has the firepower to begin writing a new chapter in the company’s post-Coles acquisition history.

Speaking of IPOs, Quadrant Private Equity is preparing to throw Burson Automotive on to the ASX with a $400 million float, according to The Australian Financial Review.

Quadrant owns 90 per cent of Burson and the AFR reports a decision on an IPO is close. Apparently UBS and Morgan Stanley are working with the private equity firm on the proposal.

Communications Minister Malcolm Turnbull has set media tongues wagging by putting media ownership regulations up for discussion.

Speaking to Sky News, Turnbull said there was a “powerful argument” for relaxing the ‘two-out-of-three’ law, where a company can have a presence in two, but not three of newspapers, television and radio. He also questioned the 75 per cent reach rule that currently limits the metropolitan networks from merging with their regional counterparts.

All the networks are broadly behind the concept of deregulation, but Seven West Media has broken with its fellow commercial broadcasters, the AFR reports.

Speaking of the networks, the AFR believes executives from Sir Richard Branson’s Virgin Group have spoken with Australia’s commercial broadcasters about setting up a video-on-demand service of their own before Netflix makes it Down Under, as everyone expects they will at some stage.

Back to investment banking gigs, BHP Billiton has selected Goldman Sachs to offload its Nickel West project in Western Australia, according to the AFR. If a sale is achieved, it could reap the miner $1bn. The AFR says Goldman is running the deal from its Melbourne office.

Glencore Xstrata boss Ivan Glasenberg got the Nickel West speculation ball rolling nicely last week when he said he would “kick the tires” on a deal. Nickel West lines up neatly with Glencore’s Murrin Murrin project.

GrainCorp chairman Don Taylor has made sure the disadvantages of shunning major league foreign investment continue to get media attention after Treasurer Joe Hockey rejected a $3.4bn bid from North America’s Archer Daniels Midland late last year.

ADM had offered to spend $250m on GrainCorp's network. Speaking to ABC’s Landline, Taylor stressed that GrainCorp can’t match that as a standalone.

"We're going through the process at the moment of improving and strengthening our network but certainly we don't have the capacity to inject that amount of money into it," said Taylor.

Elsewhere, Funtastic has sold Madman Entertainment back to its founders, Paul Wiegard and Tim Anderson, for a price that probably wasn’t far from the original deal.

Funtastic had Madman with a carrying value of $52m, but announced a likely impairment charge of $22m-$28m. That implies a sale price of between $24m-$30m.

Wiegard and Anderson sold the business to Funtastic back in 2006 for $34.5m.

Alexander Liddington-Cox is a freelance business journalist based in the Middle East.

Follow @aliddingtoncox on Twitter.

Want access to our latest research and new buy ideas?

Start a free 15 day trial and gain access to our research, recommendations and market-beating model portfolios.

Sign up for free

Related Articles