03/10/2012 - 00:50

Making room for private equity

03/10/2012 - 00:50

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Making room for private equity

THE constrained corporate finance market has improved slightly in the first quarter of the new financial year, with overall Western Australian-related activity rising to $13.72 billion from the June quarter’s total of $10.6 billion.

Mergers and acquisitions deals were most improved, totalling $11.87 billion for the three months ending September 30, according to research conducted for the WA Business News Book of Lists. In the previous three months, M&A deals emanating out of WA had totalled $9.11 billion.

However, an asset swap between Chevron and Shell accounted for nearly half of that quarterly total as they traded interests in Wheatstone and West Browse titles (see league tables).

In equity capital markets, things perked up slightly as deals rose to $1.85 billion for the September quarter compared to $1.49 billion in the three months ending June 30.

Hartleys head of corporate finance Grey Egerton-Warburton said ECM activity remained subdued but he felt it was closer to the pre-boom levels that had sustained the market before the commodities rush that started in the middle of the last decade.

“Generally people would regard this as a tough period,” Mr Egerton-Warburton said.

“I don’t so much think that; I think it was more a typical period.

“Perth is a smaller market and it can be choppy.”

The challenging market was made even more difficult when iron ore prices plunged, forcing big players such as Fortescue Metals Group to refinance debt arrangements, while at the mid-market level, Global Construction Services had to reprice a $32 million equity raising required to fund its expansion.

In mining there has been increased commentary on private equity, hybrids and bonds filling the gap left by constrained listed markets.

Tim Day, who heads UBS operations in Perth, said private equity players had already affected IPOs (not always positively) and tipped them to play an even bigger role in the resources market.

Mr Day noted private equity players now often preferred to maintain a significant holding in the company after listing, as was common in the US.

“Previously in Australia, investors wanted maximum free float and minimum overhang and preferred vendors to sell-down completely,” Mr Day said.

 

For the comprehensive database, visit www.wabusinessnews.com.au/Corporate-Finance

 

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