Wealth of opportunity attracts major players to boom town

The takeovers scene in Western Australia has changed significantly during the past year, with the ongoing boom boosting the stocks of local players and prompting an increasing presence from international investment banks.

As the rest of the world was rocked by the credit crunch, Chinese demand for control of resources has kept takeovers advisers busy here. Market observers need only to look at battles over mining hopefuls in the state's Mid West to see a strong Asian flavour via players such as Sinosteel and Shougang.

Even when China's interests are not directly linked, such as the three-way bidding war for Consolidated Minerals Ltd, its global impact is driving the hunger for others to gain a foothold in minerals production.

But whether this is a fundamental shift, the so-called resources supercycle, remains to be seen.

Students of corporate finance have noted Perth's rise as key centre in the national context, with a growing number of important companies, such as Wesfarmers Ltd and Woodside Petroleum Ltd, based in the WA capital.

It's a similar story for several multinationals, particularly the iron ore majors, which are choosing to locate their Australian headquarters in Perth.

Such growing clout does draw advisory services like bees to nectar, but this has happened before.

US-based investment banks have come during other booms and gone soon after.

In the past financial year, though, it is possible that the big players may be taking WA more seriously as a long-term opportunity.

Perhaps nothing illustrates that better than the rise of UBS as a major contributor to the local scene.

Last year, the Swiss-based giant failed to even rate in the WA Business News survey, despite its lead executive, Richard Saywell, being noted as a very active visitor to the west coast.

That fly-in,-fly-out slog has clearly paid dividends, along with a recent move here to establish a permanent presence.

UBS's rise clearly places it in a position to threaten the state's most active corporate finance players, Gresham Advisory Partners and Azure Capital.

Started by John Poynton, Mark Barnaba and Geoff Rasmussen after their workout from the sale of Poynton Partners, Azure is the biggest and most prominent of the investment banks headquartered in Perth.

It hasn't worked on the biggest deals going on this year, but it has managed a hefty load of the mid-sized work available. Its biggest successful role was in the friendly takeover of Home Building Society Ltd by Bank of Queensland Ltd, which followed Home's merger with Statewest and failed effort to absorb Police & Nurses.

The $2.4 billion friendly merger of Gindalbie Metals Ltd and Sundance Resources Ltd failed.

Azure has also recognised the times are changing, beefing up its capabilities across the board, doubling its director numbers in the past six months and growing to 30 staff.

Gresham has also grown in Perth, though more modestly, and remains an important outpost for the Sydney-based group, keeping it close to its 50 per cent owner Wesfarmers Ltd, which it advised on the country's biggest ever takeover, that of Coles Ltd.

Key Gresham adviser Jenny Seabrook spent a significant amount of time on the Coles Group deal.

Gresham has also been close to WA Newspapers Holdings Ltd for at least a decade, a relationship that has proved useful in the past year with the arrival of Kerry Stokes' Seven Network Ltd on the register and a recent high-profile board battle.

But, as is the case for many corporate finance players, it's the iron ore game where much of the work is arising for Gresham. Two years ago, advising Mid West miners would have been little more than tiddly winks for many professional investment bankers.

But fast rising ore prices have changed the business, revaluing once minor companies upwards, at a time when the market is revaluing so many other stocks in the opposite direction.

Chinese desire for direct control of minerals has radically altered the importance of this sector.

Gresham has been advising small miner Murchison Metals Ltd in its takeover of Midwest Corporation Ltd. It is up against heavyweights Morgan Stanley representing Midwest and JP Morgan acting for Sinosteel, which is a big Midwest shareholder and has a llower cash bid.

Gresham's Michael Ashforth said there was general recognition that the Chinese had achieved the strongest position in emerging players in the iron ore space.

With that, Mr Ashforth said, came a re-rating of magnetite iron ore deposits which had previously been dismissed as unviable.

He noted, however, that rising commodity prices did not necessary drive mergers and acquisitions activity in every sector, with gold being an obvious example despite prices running to $1,000 per ounce.

Clearly, you can't make fridges and cars out of gold.

Another active player in the WA market has been Macquarie Bank, which is led locally by Martin Alciaturi.

Macquarie's Perth office has had only cursory interest in a number of big deals the bank has worked on, including Xstrata's $3.1 billion takeover of Jubilee Mines NL, however it has also been growing its staff and is well placed to capitalise on WA's emergence as a corporate capital.

Perhaps one of the surprises of the past year has been the emergence of Euroz as a significant player in the WA market.

While much of the firm's work appeared to come through companies it had previously advised and promoted in earlier phases, rivals have noted that Euroz has been growing its team in a concerted effort to capitalise on its success in other corporate areas.

Notable in that is the $1.12 billion friendly merger between Applecross-based Equigold NL and Queensland's Lihir Gold Ltd.

The corporate advisory side of Perth-based accounting firms was also very active, particularly in the unlisted sector where they dominate.

With a wave of private sales in the past two years, such as Kwinana maintenance specialist TCC to the UK's Cape plc, this part of the market has been active and the size of the transactions considerable.

KPMG executive director Adrian Arundell found that the volatility of the markets was impacting on that sector.

Mr Arundell said the IPO market had received a setback in recent months, with issues surrounding Brierty Ltd an obvious cause.

Brierty, which listed late last year, shocked the market with two profit warnings, resulting in a significant hit on its share price and considerable examination of its management performance.

"Brierty has scared a lot of private players off the idea of IPOs," Mr Arundell said.

Apart from the big four, one of the most active accounting players was BDO Kendalls, which also picked up a significant amount of the bigger private trade sales.

BDO corporate finance and consulting partner Sherif Andrawes said the firm's workload as lead adviser was outweighed by its significant role in conducting independent experts' reports.

The firm has conducted around 70 of the experts' reports, usually brought in by advisers or lawyers involved in a takeover, during the past two years.