M&A deals define June quarter - SPECIAL REPORT

06/07/2015 - 09:59

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Upwards of 130 corporate finance transactions worth more than $11 billion were announced in WA in the June quarter, but most notable was a handful of landmark M&A deals.

M&A deals define June quarter - SPECIAL REPORT
BIG DEAL: Azure Capital’s Richie Baston (left), Geoff Rasmussen and Adrian Arundell say working on the iiNet deal was ‘intense’. Photo: Attila Csaszar

Upwards of 130 corporate finance transactions worth more than $11 billion were announced in WA in the June quarter, but most notable was a handful of landmark M&A deals.

 

 

 

The June quarter was a bountiful period for a small group of corporate advisers and lawyers in Perth.

While the continued dearth of large capital raisings limited opportunities for most stockbrokers and advisers, a handful of big M&A deals told another story.

This included the creation of two major, independent resources sector businesses in Perth.

South32 was demerged from BHP Billiton and listed on the ASX, while Quadrant Energy was established after Apache Corporation sold its Western Australian oil and gas assets into a highly innovative structure.

There were also some big-ticket takeover deals in the mining sector during the quarter, with Independence Group, Evolution Mining, and Iluka Resources all looking to expand through acquisitions.

It was a similar story in mining services, with Programmed Maintenance Services able to negotiate a friendly takeover deal with Skilled Group, six months after its first attempt was rebuffed.

The takeover tussles surrounding iiNet and Amcom Telecommunications took more unexpected twists and turns during the June quarter, with both now approaching closure.

For those looking ahead to new opportunities, the state government vastly expanded the scale of its privatisation program, and Chinese investors started buying.

Business News’s analysis of WA deals in the June quarter showed half a dozen advisory firms winning most of the spoils.

Macquarie Capital’s own balance sheet muscle helped it after the investment bank teamed up with Brookfield Asset Management to buy Quadrant Energy.

Macquarie also advised Sydney-based TPG Telecom on its takeover of iiNet, and Programmed on its pursuit of Skilled.

In addition, it was lead manager for one of the largest capital raisings in the June quarter – the $121 million initial public offering of Australian Finance Group, which for many years has had Macquarie as a substantial shareholder.

Local firms Azure Capital and Hartleys had a good quarter, mainly as a result of long-standing clients executing transactions.

Azure’s biggest fee earner was advising iiNet, which led to what managing director Geoff Rasmussen called some “pretty intense” periods of work.

Azure has advised iiNet on multiple acquisitions in the past, though Mr Rasmussen said real value could come from not pursuing takeovers.

“For every deal we’ve done with them, we talked them out of three or four,” he said.

When TPG and M2 Group lobbed their bids for iiNet, a lot of preparatory work had already been done.

“We were well across what their proposals might be worth,” Mr Rasmussen said.

Another notable transaction was advising the owners of Force Equipment on the sale of their business for about $100 million.

Azure director Adrian Arundell said he had a long-running mandate with Barry Stewart and Greg Bond to get their business sale-ready.

The deal proceeded when China Minerals Group came looking for counter-cyclical investment opportunities in the mining services sector.

“They wanted a beachhead and to build something around it,” Mr Arundell told Business News.

The growing appetite among Chinese interests was evidenced by Sichuan Railway Investment Group’s decision to buy a 60 per cent interest in Altona Mining’s Cloncurry project for $363 million.

Another acquisitive Chinese company is Zijin Mining Group, which has lobbed a bid for Phoenix Gold, not long after acquiring Norton Gold Fields.

Hartleys is advising Altona Mining and two other targets in friendly takeover deals – Sirius Resources and Anatolia Energy.

It also completed a number of small capital raisings during the quarter, but now faces a big test, as lead manager of Atlas Iron’s ambitious $180 million raising.

Global investment banks Goldman Sachs and UBS were involved in some of the major transactions.

They worked together on the South32 demerger, with Goldman engaged as lead adviser and UBS as joint adviser.

Locally, UBS is advising Independence Group on its $1.8 billion bid for Sirius, while Goldman is advising Iluka on its pursuit of Irish mineral sands company Kenmare Resources.

This is an unusually complex deal; it has an announced equity value of $363 million, but also involves a restructuring of about $400 million of debt.

Global finance house Rothschild has not been a big player in the WA market, but emerged in three notable matters.

It is advising Kenmare on the Iluka takeover proposal, advised La Mancha on the sale of its WA gold assets to Evolution, and most notably has been mandated (with Deloitte) as joint financial adviser on the sale of Fremantle Ports.

Treasurer Mike Nahan estimates the state government will raise up to $5 billion from asset sales.

He has made it clear there will be plenty of other opportunities for advisers.

“Given the government’s significantly expanded asset sales program, further tender requests for lead advisers as well as supporting specialist advisers will be released in due course,” Dr Nahan said last month.

Other assets flagged for sale include the TAB, office buildings, residential land estates, Keystart loans, softwood plantations, and the government’s fleet of 11,000 vehicles.

Legal advisers

The Quadrant Energy transaction provided a timely boost for Perth law firms coping with a relatively quiet market.

Corrs Chambers Westgarth acted for the Macquarie-Brookfield consortium on the acquisition, including due diligence, negotiation of the transaction documents, financing, and the associated gas supply deal with Alcoa.

Separately, Allens, Allen & Overy and King & Wood Mallesons advised entities involved in the purchase, while Clifford Chance advised Apache Corporation on the sale.

Ashurst benefited from its long-running coverage of mid-cap mining companies in WA, securing advisory work with Sirius, Iluka, Western Areas and Mungana Goldmines.

Perth’s largest law firm, Herbert Smith Freehills, had a wide spread of work, advising Independence Group, Macmahon Holdings, TFS Corporation and Sydney-based Evolution.

That followed its role as legal adviser on the South32 demerger.

Telco deal

Arguably the biggest achievement during the quarter was the support Amcom Telecommunications garnered for its friendly merger with Vocus Communications.

A remarkable 98.7 per cent of Amcom shareholders voted in favour of the merger, countering attempts by iiNet suitor TPG to block the deal.

Amcom chairman Tony Grist was frontman in the media campaign to win support, but behind the scenes, advisers Lazard, Clayton Utz and FTI Consulting all played a big role.

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