“Exit” is the theme of the month in Asia, as Australia becomes the latest spot for private equity groups to take advantage of greatly improved market conditions and monetise their regional portfolios.
In what will be Australia’s biggest IPO in more than two years (since Boart Longyear, a mining industry drilling services group, raised A$2.6bn in April 2007), Myer, Australia’s largest department store group, plans to raise as much as A$2.34bn ($2bn) selling shares at A$3.90 to A$4.90 each, it said in a prospectus issued Monday.
The stock will be offered at 14.3 to 17.3 times forecast earnings, compared with a 17.2 multiple for David Jones, Australia’s second-biggest department store operator.
For US buyout firm TPG, which teamed up with Blum Capital, its Asia-Pacific affiliate, and members of the Myer family to buy the retailer in 2006 for A$1.4bn, the timing could be just right. Australia has avoided a recession and both economic growth and consumer confidence are resilient.
So much so that TPG and Blum Capital — which between them own nearly 85 per cent of the company – together with the Myer family have said they are prepared to retain up to 20 per cent of their holdings, depending on the level of demand from new investors, reports BusinessSpectator, noting “that means TPG and Blum between them will own between nothing and 13.5 per cent of Myer, and the Myer family between nothing and 1.5 per cent”.
As the FT reported earlier this month, the IPO will test demand for new shares after the biggest drought of IPOs in 16 years. The Myer sale may herald a run of offerings by private equity-owned retailers, contributing to more than A$10bn in capital raisings by June 2010, according to UBS. As Bloomberg reports on Monday, just 45 Australian companies went public in the 12 months ended June 30, the smallest number since 1993 and an 81 per cent drop from a year earlier.
Elsewhere in the region, the private equity arm of the Government of Singapore Investment Corporation and Olympus Capital, a US fund, are considering selling their majority stake in China Minzhong, a leading Chinese food processing company, the FT reported last week. Carlyle Group meanwhile this month sold Kbro, its Taiwanese cable-television operator, to Taiwan Mobile in a cash and shares deal worth $1bn.
For Myer, in a domestic context, the float is about competition with its arch-rival, David Jones. Myer’s IPO is “heavily retail-oriented and targeted at the 3.1m members of Myer’s loyalty programme who generate 63 per cent of its sales”, writes BusinessSpectator’s Stephen Bartholomeusz, adding that the “willingness of Myer’s management and their private equity owners to retain an exposure to the group post-listing will provide some comfort”.
Myer earlier this month reported a 15 per cent increase in net income to A$109m for the year ended July 25 on sales of A$3.26bn. David Jones, meanwhile, last week announced annual profit of A$156.5m from revenue of A$1.99bn.
But, concludes Bartholomeusz:The success or otherwise of the Myer float has importance beyond the proceeds it delivers the vendors or the market relativities it creates with David Jones. It will set the tone for a solid pipeline of other initial public offerings waiting to see how strong demand, particularly from retail investors, might be.
Related links:
Myer aims for $2bn IPO - WSJ