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Australian takeover binge to ease, shift offshore

Tuesday June 14, 2005, 3:53 pm



By Sonali Paul

MELBOURNE, June 14 (Reuters) - Australian investment bankers expect to be busy with takeovers at home and offshore for the rest of the year, but say it will be tough to match the frenzy of big deals over the past 18 months.


The takeovers of WMC Resources (ASX: WMR.ax) , Southcorp (ASX: SRP.ax) , National Foods (ASX: NFD.ax) , and Affinity Health and the reshaping of General Property Trust (ASX: GPT.ax) capped $41.3 billion worth of bids involving Australian companies so far this year.

That was up 3.5 percent on the same period in 2004 and made up 28 percent of Asia-Pacific deals outside Japan, according to research firm Dealogic.

"We've never been busier than we have been in the last six months," said Peter Scott, investment banking managing director at UBS.

"But I think it's got to slow down in terms of the number of large deals or total deal value because for a market of our size, it's just unsustainable."

UBS UBSN.VX, which advised on $20 billion worth of bids announced in the first-half, including BHP Billiton's (ASX: BHP.ax) (ASX: BHP.ax) BLT.L $7 billion takeover of WMC Resources, landed at the top of adviser rankings, ahead of Citigroup C.N and Deutsche Bank DBKGn.DE.

There are still potential targets among industrial companies in Australia, but mostly in the small- and mid-cap sectors.

WHAT SLOWDOWN?

A recent string of profit warnings, particularly in sectors exposed to slowing consumer spending and residential construction, could also spawn takeovers, while larger companies are looking for growth offshore.

"Deals are still getting done. Confidence is high. Equity markets are still conducive to activity. And you've got a number of mature businesses looking to expand offshore. So we're certainly not seeing any slowdown," said Scott Perkins, co-head of global banking for Deutsche Bank in Australia.

Deutsche, coming off a hectic first-half, was involved in most of the biggest takeovers, including WMC, Southcorp, Metcash MTS.AX and Westfield Group (ASX: WDC.ax) .

Media groups could generate a slew of mergers after the government eases cross-media ownership laws, but investment bankers say political haggling could until next year.

John Fairfax Holdings Ltd. (ASX: FXJ.ax) , publisher of the Sydney Morning Herald, has said it would be interested in merging with a TV network, while Seven Network Ltd. (ASX: SEV.ax) has said it aims to be a predator rather than a target.

Australian ownership laws, which the conservative government aims to overturn when it takes control of the Senate from July, ban companies from owning both a major newspaper and TV network in the same large city.

Prime Minister John Howard has made clear he will not waste political capital on the issue if it is too hard to resolve.

TRADE SALES

The private equity sale of the Taverner pubs business, estimated at up to A$400 million, and the possible A$2.9 billion break up of health care group Mayne Group (ASX: MAY.ax) are among big potential sales being eyed by bankers.

Investment bankers said splitting Mayne's injectable drugs business and its pathology, radiology and pharmacy arms into two listed companies, would be the simplest path for the board.

But with many companies coveting parts of Mayne and jitters in the market for new listings, sales of assets directly to competitors could not be ruled out.

"The certainty premium of a trade sale has increased," said Deutsche's Perkins.

Companies that might be looking over their shoulders following profit warnings and share price slumps this year include auto brakes maker Pacifica Group (ASX: PBB.ax) , Miller's Retail MRL.AX and manufacturer Nylex (ASX: NLX.ax) .

Larger companies, running out of potential targets in Australia, are hunting for offshore opportunities in infrastructure, property, transport and logistics.

"In a market looking for yield, there's increased appetite for utilities assets as well as property offshore," said JP Morgan's head of mergers and acquisitions, Jon Gidney.

Westpac's (ASX: WBC.ax) Australian Infrastructure Fund (ASX: AIX.ax) and infrastructure funds run by Macquarie Bank (ASX: MBL.ax) would be looking to build on their purchases of stakes in European airports and Chicago's Skyway toll bridge.

In transport and logistics, acquisitive Toll Holdings Ltd. (ASX: TOL.ax) , has expressed interest in deals in Asia and Australia worth up to A$600 million, focusing on China, India, Malaysia, Thailand and Vietnam as key areas for growth. BIDS INVOLVING AUSTRALIAN COMPANIES ANNOUNCED IN YR TO JUNE '05 Rank Adviser Name Amount US$ mln 1 UBS 20,027 2 Citigroup 14,078 3 Deutsche Bank 12,494 4 Macquarie Bank 10,674 5 Carnegie Wylie 9,302 6 JP Morgan 6,247 7 Goldman Sachs 5,841 8 Lazard 4,065 9 CS First Boston 3,122 10 Morgan Stanley 2,809 Source: Dealogic ($1=A$1.30)






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More Quotes and Company Information: AUSTRALIAN INFRASTRUCTURE FUND (ASX: AIX.ax)
BHP BILLITON(ASX: BHP.ax)
FAIRFAX HOLDINGS LIMITED(ASX: FXJ.ax)
GENERAL PROPERTY TRUST(ASX: GPT.ax)
MACQUARIE BANK LIMITED(ASX: MBL.ax)
MAYNE GROUP LIMITED(ASX: MAY.ax)
NATIONAL FOODS LIMITED(ASX: NFD.ax)
NYLEX LIMITED(ASX: NLX.ax)
PACIFICA GROUP LIMITED(ASX: PBB.ax)
SEVEN NETWORK LIMITED(ASX: SEV.ax)
SOUTHCORP LIMITED(ASX: SRP.ax)
TOLL HOLDINGS LIMITED(ASX: TOL.ax)
WESTFIELD GROUP(ASX: WDC.ax)
WESTPAC BANKING CORPORATION(ASX: WBC.ax)
WMC RESOURCES LIMITED(ASX: WMR.ax)


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