DataRoom AM: Woolworths' weak spot

Two years ago Woolworths rid itself of an underperforming asset that turned into a river of gold for private equity – is it about to make the same mistake again?

Elsewhere, Super A-Mart returns to the conversation surrounding likely IPO candidates, investors hoping for corporate activity at Oil Search are set for disappointment and TPG cashes in on its Inghams Enterprises purchase.

Woolworths' underperforming discount department store chain Big W is at the centre of divestment rumours, with reports the retail giant has engaged two advisory firms -- including Credit Suisse -- to counsel on strategy. The talk, which has been tempered by a denial from Woolworths, focuses on the prospect of the retailer pursuing a $2 billion-plus trade sale or IPO.

While private equity would no doubt be keen to try its luck with a Woolworths offshoot given Anchorage's recent success with Dick Smith, the retailer would surely be more cautious if it does end up going down the divestment route, with an IPO more likely.

As the possible Big W IPO remains in its formative stages at best, another retail chain appears to be closing on plans to light up ASX boards. Quadrant Private Equity is believed to be in discussions with UBS and Goldman Sachs over an IPO of Super A-Mart and Barbeques Galore, though a $600 million exit may still be over 12 months away.

Also in the IPO market, local accounting software firm Xero has called on advisors to aid with a potential $500m-plus float in the US next year. Xero, which is dual-listed on the NZX and ASX, has held talks with Morgan Stanley and Credit Suisse on the IPO, The Australian Financial Review reports.

Meanwhile, private equity giant TPG is looking to capitalise on strength at poultry giant Inghams Enterprises by pursuing a $665m refinancing that will allow it to take a dividend from the business it bought for $900m early last year. The raising is tipped by the AFR to draw interest from investment banks keen to get a seat at the table ahead of a possible listing in 2015 or 2016.

In energy, shareholders are patiently waiting for a strategy update from Oil Search today. Recent speculation of a restructure at the ASX-listed firm and a takeover play from Woodside Petroleum seem extremely unlikely, according to the AFR, but investors remain alert to the potential activity.

In updates to stories we covered earlier in the week, Cabcharge has confirmed takeover interest from US-based Fleetcor, but denied claims a $500m offer was put forward, while the sales process at van Eyk is progressing smoothly as term sheets are signed with suitors for its Australian and NZ divisions. Lonsec has been heavily linked to the Australian research operations.

Finally, construction software provider Aconex has lifted the size of its IPO by about $100m on strong demand, while education provider Australian Careers Network has successfully raised $70m through a bookbuild ahead of its $86m November 26 listing.