Hybrids steal IPO thunder

WITH the share market no longer the automatic cash cow for backers of initial public offerings that it once was, the number of new offerings has continued to slide.

The latest survey by KPMG Corporate Finance shows that the number of companies that completed an IPO declined to 56 in 2002-03 from 60 in 2001-02 and is the lowest number since 1999 – the year before the boom.

However, while the numbers are down this year more money has been raised than the previous year.

This was due entirely to the distortion brought about by one float – the $1.9 billion listing of Promina on May 12.

The result has been a 60 per cent increase in money raised from $1,989 million in 2001-02 to $3,169 million in 2002-03.

With Promina taken out of the picture, the total amount raised in the Australian market would have dropped by 36 per cent to only $1,269 million in the past year while the average size of IPOs would plunge from $33 million to just $23 million.

To put that number raised in perspective, the money raised in the current financial year was around one-fifth the amount raised in 1998.

In that year $15,174 million was raised including more than $8,000 million from Telstra 1.

In 1999 raisings slumped significantly to around $4,800 million before jumping back to $15,430 thanks, in part, to the $9.7 billion Telstra second tranche sale.

KPMG’s national head of mergers and acquisitions Antony Cohen said 2002-03 started off promisingly with 38 IPOs in the half year to December 2002, however, the war in Iraq and associated uncertainty meant activity dropped off to just 18 floats in the second half.

However, Mr Cohen said he believed the IPO figures told only part of the story of investor sentiment.

He said there was also a growing interest in hybrid equities, which combine elements of equity ownership with reduced volatility.

“Hybrid equity issues during the year raised at least as much as the entire IPO market, including Promina Group,” Mr Cohen said.

The biggest issues included AMP, with a $1.15 billion issue of reset Preferred Securities, Westpac with a $700 million capital raising and Southern Cross Fliers with a $600 million issue.

“Hybrid issues will continue to be a major feature of equity raising activity in the Australian market,” Mr Cohen said.

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ASHBURTON Minerals Ltd, a Perth-based junior exploration company, has secured $1.5 million in debt funding as it gears up towards a $3 million equity raising.

The $4.5 million is to be used to fund the acquisition of the Wirralie Gold Mine in Queensland.

The mine is currently owned by Delta Gold, a subsidiary of Canadian miner, Placer Pacific. Ashburton Minerals is expected to release a prospectus to raise the money, while the Macquarie debt facility will be used to purchase Delta’s Drummond Basin assets.

The funds will be used to refurbish the plant and conduct a bankable feasibility study with the aim of bringing the mine back on to production early in 2004.

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MANGANESE and Chromite producer Consolidated Minerals will not go ahead with its proposed development of a ferrochrome smelter in Port Hedland after a technical feasibility study concluded against the project. The company has decided to refocus its attention on remaining a producer for overseas ferrochrome producers.

Chrome ferro-alloy prices have increased by more than 50 per cent over the past 12 months, while the price of chromite ore has increased 15 per cent in the past quarter.

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