17 May 2013

Will 2013 be a bumper IPO and M&A year for New Zealand?

New Zealand is an island country famous for its spectacular landscapes, the All Blacks, Sir Edmund Hillary, sheep and being the location of the Lord of the Rings trilogy. However, one other interesting fact is that it has also been the scene of an uptick in mergers and acquisitions (M&A) and initial public offerings (IPOs) of late.

A total of 75 deals worth a combined USD 2,426 million have been signed off by New Zealand-based companies in the year-to-date, according to Zephyr, the M&A database published by Bureau van Dijk. Compare this aggregate value with that recorded for the same 19 week period for the last six years and it seems the country’s M&A arena is coming up trumps, and this does not even include the highly publicised IPOs of state-owned enterprises such as Mighty River (2012: USD 653 million; 2011: USD 1,300 million; 2010: USD 1,700 million; 2009: USD 1,088 million; 2008: USD 1,785 million; 2007: USD 2,482 million).

M&A value in the region in the year to date has been driven by four deals worth more than USD 100 million, which may not appear particularly impressive at first blush, but was still better than the same period in 2012 when just one deal topped USD 100 million. The largest 2013 deal to date was global media group News Corp, through its Australian arm, selling a 44 per cent stake in the pay television operator Sky Network Television for USD 675 million. This was followed by the acquisition of waste management company EnviroWaste by billionaire Li Ka-shing's Cheung Kong Infrastructure for USD 430 million in a deal which provided an exit for Australian private equity firm Ironbridge Capital.

In a calendar year comparison, it appears that M&A value bottomed out in 2010, slumping from USD 9,591 million, the highest recorded in the ten years under review, to just USD 3,257 million. While it picked up in the intervening periods it remained relatively level ahead of 2013’s bumper start, which is already double the total USD 5,156 million recorded for last year. Putting value to one side for a moment, activity has been on the rise for the last three years after reaching a nadir of 187 deals in 2009: there were a total of 308 transactions signed off by New Zealand-based companies in 2012, the highest recorded since 344 in 2007.

It is now time to turn the spotlight on New Zealand’s IPO pipeline, which has been busy of late as the government is prepping and rolling out floats for a number of state-owned enterprises as part of a privatisation policy aimed at raising as much as NZD 7,000 billion to fund investment in new schools, roads and the rebuilding of earthquake-struck Christchurch.

Fresh from listing Mighty River Power in a deal worth USD 1,442 million, by far and away New Zealand’s largest ever completed IPO, the government is now focusing on other partial selldowns. Step forward Meridian Energy, the country’s largest renewable electricity generator, investing in international projects in Australia and the Pacific and controlling a 14 per cent market share domestically through its Meridian and Powershop retail brands. The government is considering offering up to 49 per cent in a flotation slated for the second half of the year.

Other state-owned enterprises flagged for a partial selldown include Utility Genesis Energy, coal miner Solid Energy and flag carrier Air New Zealand. These are joining a growing rumoured and announced IPO pipeline including the likes of: website search software developer SLI Systems; jetpack maker Martin Aircraft; corporate travel booking engine Serko; fuel supplier Z Energy; and most recently dairy processor Synlait Milk. With all this in mind, it should not come as a surprise that 2013 is already a bumper IPO year by value with three announced or completed deals worth a combined USD 1,465 million, the highest recorded in the last ten years under review.

All in all 2013’s M&A and IPO activity is shaping up nicely and if the proposed listing of further state assets goes ahead, well, watch this space.

© Zephyr