PRINT THIS PAGE Changed Dynamics 12/12/2007. Source: Asia Private Equity Review.
Buy-out investors face formidable hurdles in Australia and New Zealand. To private equity investors, especially those in the buy-out segment that are vying for opportunities in both Australia and New Zealand, the market dynamics in these two countries have now changed, writes the Asia Private Equity Review. They are no longer favouring financial investors, even though their coffers are rich with cash. After more than three months of arduous effort, both Archer Capital and Ironbridge Capital now will have to find another deal to deploy the A$1.15 billion (US$1.03 billion) that they had reserved for the acquisition of the consumer and pharmacy units of Symbion Health Ltd. (‘Symbion’). Following a ruling by the Australian Tax Office, Symbion announced that the merger with Healthscope Ltd. will not proceed. The ruling had effectively blocked the sale of Symbion’s consumer and pharmacy units to the buyout investors.
The Australian Tax Office ruled that Symbion “cannot benefit from scrip-for-scrip CGT rollover relief ” in the latest proposed takeover scheme by both Healthscope and the private equity investors. In the latest offer by Healthscope, inclusive of the transaction sum to be committed by both Ironbridge Capital and Archer Capital, it placed Symbion’s value at A$2.87 billion, compared to the A$2.9 billion earlier offered.
At the same time, the Canada Pension Plan Investment Board’s bid for Auckland International Airport Ltd. (‘AIAL’) is now locked in an impasse. Following AIAL’s public statement that discussions with the Canadian institution has been terminated, the latter has decided to revise the deal structure and substantially increase its equity commitment as its latest attempt to assume an equity stake of between 39% and 49% stake in New Zealand’s busiest airport. The transaction would have commanded an estimated A$1.79 billion, if proceeded.
In 2006, both Australia and New Zealand led all other markets as the most favoured buyout destinations. Together, they commanded a combined US$16.0 billion in deal value, exceeding Japan, the second most-favoured private equity market in the year, by 31.3% (fig. 18). But the tides turned during the year. Both Australia and New Zealand suffered an unusual high number of “failed” buyout deals, at eleven. This is an alarming development especially when 2006 was a blissful year to buyout investors, in which there was virtually no record of abandoned deals. At the beginning of December, there were eight buyout deals that aggregated to US$4.8 billion with “pending” status attached to them (fig. 19). This development highlights a rather volatile Asian buyout market where deal consummation has become a taxing task, and where unexpected hurdles could emerge at any time.
Despite this increasingly rugged buyout terrain, CHAMP Private Equity is resolute in adding another deal to its buyout portfolio. It has recently submitted a non-binding proposal to acquire all outstanding shares in Nylex Ltd. The latter is listed on the Australian Stock Exchange and distributes plastic-based products.
CHAMP Private Equity is offering A$2.65 for each of the target company’s shares, as well as outstanding convertible notes paying A$0.81 for each option. The entire transaction would represent a deployment of A$150 million. CHAMP Private Equity has been granted an exclusive period to undertake due diligence and negotiate a bidding agreement. This will expire on 31st January 2008. Hopefully, CHAMP Private Equity can break the hex that has frustrated a long list of buyout deals from being consummated.
Asia Private Equity Review (APER) is the foremost voice on matters related to private equity/venture capital in the region. Well-recognised as being the singular source for accurate and timely news, in-depth analysis and global perspectives, APER is published by the Hong Kong-based Centre for Asia Private Equity Research. For further information please visit their website at www.asiape.com or email them at info@asiape.com
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