20 December 2013

New Zealand revisited

In May there was a feature about whether New Zealand mergers and acquisitions (M&A) would come up trumps in 2013 and data by Zephyr, the M&A database published by Bureau van Dijk, certainly seems to indicate that this is the case. The value of M&A activity targeting companies in the Southern Hemisphere country in the year to date has already surpassed that of 2012 and is in fact the highest recorded since 2009, helped in part by 15 announced or completed deals worth more than USD 100 million.

The value of M&A involving New Zealand-based companies amounted to USD 6,750 million at the time of writing,  representing an 18 per cent increase on the USD 5,703 million-worth of deals recorded by Zephyr in 2012. M&A value is one of the highest of the last decade (2009: USD 9,591 million; 2004: USD 8,960 million; 2003: USD 7,391 million) and is matched by volume. There were 309 deals announced or completed in 2013 to date and while this represents a 10 per cent decline from 342 deals in 2012, the result remains one of the highest of the past ten years, bar the 344 transactions recorded in 2007.

M&A value in New Zealand in the year to date has been driven by 15 deals each worth more than USD 100 million and which, when combined, total USD 3,650 million, or 54 per cent of the total value so far in 2013. Targets range from pay television services provider Sky Networks and airline operator Air New Zealand to integrated retirement villages group Metlifecare and dairy farmer Synlait Farms.

Dealmaking was mainly kept within the country with bidders or subsidiaries of international companies based in New Zealand carrying out USD 1,647 million-worth of transactions. However, suitors in Australia, the UK and Hong Kong were certainly present in this year’s M&A activity. Woolworths carried out the largest direct acquisition of a New Zealand company by an Australian bidder so far this year, spending USD 275 million on direct retailer Ezibuy from shareholders which included Catalyst Investment Managers.

Hidden in the wings, waiting to be announced, are deals like Transpacific Industries’ proposed sale of its New Zealand arm as the Australian recycling and waste management services provider seeks to gain traction on liabilities racked up during pre-financial crisis, debt-fuelled expansion. The auction could reportedly fetch around NZD 900 million (USD 742 million) and, according to Reuters, has attracted Carlyle Group, Archer Capital and KKR. The rumoured deal would be worth more than that involving fellow domestic sector player Envirowaste when billionaire Li Ka-shing's Cheung Kong Infrastructure acquired the waste management company for USD 430 million earlier this year in a deal which provided an exit for Australian private equity firm Ironbridge Capital.

It is easy to focus on the large value M&A deals but at the other end of the spectrum are interesting transactions such as the recently announced management buyout of Gibson Group, with founder Dave Gibson walking away from his 36-year old production company in order to step into the role of chief executive of the New Zealand film commission. The acquisition of the primetime and children's content producer by four senior members of management is one of several involving New Zealand television and film producers in recent years.

The point being made that it is easy to get hooked up on whether M&A activity is returning or seeping away from New Zealand and that while total investment in the country lags significantly behind that of US, UK or Australian-based targets, for example, certain sectors in the country are certainly drawing in their fair share of attention.

© Zephyr