18/01/2016 - 10:17

Funding deals for select few

18/01/2016 - 10:17

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SPECIAL REPORT: Livestock exporter Wellard has had a rocky start to life as a listed company after completing Western Australia’s second-largest capital raising of 2015, and the state’s sixth-largest initial public offerings of all time. Wellard’s $299 million IPO was one of the few high points of 2015, when a lack of mining deals led a sharp slide in overall capital raising activity.

Funding deals for select few
BOOM: The Wellard IPO delivered a big payday to managing director Mauro Balzarini. Photo: Attila Csaszar

Livestock exporter Wellard has had a rocky start to life as a listed company after completing Western Australia’s second-largest capital raising of 2015, and the state’s sixth-largest initial public offerings of all time.

Wellard’s $299 million IPO was one of the few high points of 2015, when a lack of mining deals led a sharp slide in overall capital raising activity.

Another highlight in a lean year was the $125 million IPO of Australian Finance Group.

In many respects, these two deals tell the story of 2015.

The ability of these companies to complete large IPOs – by WA standards – was based on their long track record as profitable businesses with solid growth prospects and no exposure to resources.

They also signed up global investment banks to manage their raisings.

Wellard signed up UBS and Deutsche Bank as joint lead managers and Corrs Chambers Westgarth as legal adviser, while Macquarie Capital and Herbert Smith Freehills handled the AFG float.

Despite these attributes, the pricing of both deals came in at the bottom end of their target range, reflecting the soft market conditions.

AFG scrip was issued at $1.20 per share, and ever since has traded lower; it’s currently at $1.02 per share.

Wellard scrip was issued at $1.39 per share, but has fallen sharply in 2016 as the company has been forced to deal with bad publicity on its shipping operations.

At the time of going to press, its stock price had slumped to $1.15 per share.

Both IPOs delivered a big payday to the vendors, including AFG founder Brett McKeon and Wellard managing director Mauro Balzarini.

Looking ahead, the two companies have gained extra financial firepower to pursue growth initiatives, which in Wellard’s case includes development of feedlots and an abattoir in China and expansion of its shipping fleet.

UBS on top

The Wellard deal helped put UBS at the top of the Business News 2015 league table of completed capital raisings.

UBS was a lead manager on four capital raisings, including Seven West Media’s $311 million entitlement issue – the biggest WA deal of the year.

Macquarie Capital was ranked number two, helped by the AFG float and a large block trade for Sandfire Resources.

Hartleys was the best of the local broking firms, but had to work especially hard to get there, with its largest transaction being an $86 million raising for struggling iron ore miner Atlas Iron.

It also had a large number of small transactions, raising a total of $167 million in 25 deals.

That put it ahead of local competitors Argonaut, Patersons Securities and Euroz Securities.

Director corporate finance Dale Bryan, who replaced Grey Egerton-Warburton late last year, said Hartleys would continue focusing on its traditional markets, but would also continue to grow its business in other sectors such as tech and soft commodities.

“Resources, energy and WA industrials will continue to be the main game, there is no doubt about that,” Mr Bryan said.

It’s a similar story at Euroz, which had some success finding new opportunities outside its traditional focus areas.

Its clients last year included fishing company Mareterram, US-focused tech float Updater, and local tech firm Spookfish.

However, its biggest transactions for the year were for resources companies, notably Sino Gas & Energy Holdings, Troy Resources, and Australis Oil & Gas.

Euroz managing director Andrew McKenzie said the big opportunity in WA continued to be resources.

“We don’t want to let go of our market position in resources,” he said. “We still have seven analysts in our research team.”

Mr McKenzie said that when the resources sector did turn positive, he expected the level of expertise and interest among competitors would have waned.

Among law firms, Steinepreis Paganin continued to be the most active in equity capital raisings, working on 41 transactions last year.

Corrs (12 WA transactions) and boutique West Perth practice Bellanhouse Legal (9 transactions) were also busy.

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