Quarter In Review
Calendar year 2018 ended with a not unusual flurry of deal activity, particularly in the M&A space. ECM was proving more difficult to execute, with volatility having increased as US-China trade tensions mounted, and concerns grew over the potential ramifications of the Hayne Royal Commission.
Whilst volatility in the resources sector is nothing new for local advisers, its creeping impact on energy and industrials is driving strategic M&A opportunities.
There were several big ticket M&A transactions announced in Q4 2018, with target boards showing that they are happy to take their time to analyse merits of transaction before committing to engage/recommend.
Calendar year 2019 seems to have started as 2018 finished, with increasing confidence in the public M&A market, coupled with residual nervousness in ECM. However, we think the release of the Hayne Royal Commission Report may have the effect of “clearing the air” for the market, particularly given the extent to which financials drive index performance and general confidence, and we are beginning to see signs of renewed optimism for IPOs and secondary offerings looking to target the post half-year reporting period.
Private equity continues to be active in the local and national market. This follows global private equity buyout value reaching an 11-year high for the 2018 financial year.
We are pleased to report Gilbert + Tobin’s continued strong performance in the national corporate finance league tables published by Bloomberg, as summarised below:
||LEAGUE TABLE TYPE
||Australia/NZ by number of deals as legal advisor to the manager (21 issues)
Australia/NZ by number of deals as legal advisor to the issuer (15 issues)
Australia & NZ announced deals by deal count (83 deals)
||Australia/NZ by deal value (US$29,475m)
Our practice in Western Australia was very active in Q4 2018. Notable transactions included:
BGH Capital proposed takeover of Navitas
We are advising the BGH-led consortium consisting of BGH Capital, AustralianSuper and Rod Jones on the proposed A$2.1 billion takeover of Navitas.
Mineral Resources sale of interest in Wodgina Lithium Project
We advised Mineral Resources on the sale of a 50% stake in its Wodgina Lithium Project, to form a lithium joint venture with U.S. based Albemarle Corp for US$1.15 billion. Albemarle will take a 50 percent stake in the joint venture that will own and operate the Wodgina mine and develop a plant producing lithium hydroxide.
Shekel Brainweigh Limited IPO and ASX Listing
We advised Shekel Brainweigh Limited on its A$10.15 million IPO and ASX listing, being the first direct listing of an Israeli-incorporated company on ASX.
BCI Minerals divestment of iron ore portfolioWe advised BCI Minerals Limited on the sale process for divestment of up to 100% of its iron ore portfolio, of which BCI Minerals has agreed to sell its Kumina Iron Ore Project to Mineral Resources Limited for a total consideration of A$35 million.
This capped off a busy year for our team locally as reflected in the 2018 Business News league tables released during the quarter. For announced M&A and completed ECM transactions with a connection to Western Australia, Gilbert + Tobin has continued the Top 4 placing it has record for the last three years:
||LEAGUE TABLE TYPE
||WA completed deals by deal count (21 deals)
||WA completed by deal value (A$643m)
||WA announced deals by deal count (13 deals)
||WA announced by deal value (A$7,639m)
A selection of interesting developments and corporate finance transaction tips for advisers - all in two minutes or less.
Israel direct listing
Israel has joined the list of jurisdictions for which direct listings (without the use of CHESS Depositary Interests which are typical of IPOs involving foreign incorporated entities) are possible on ASX. Some specific provisions are required in Israel company constitutions to facilitate a direct listing.
"Go shop" update
The AFR agreed with our prediction in the October 2018 Expert Adviser that “go shop” provisions in support of control transactions will become more popular (see 'Go shop' one to watch in 2019 M&A” (paywall link here). Indeed, we think that with volatility on the rise, we will see the need for yet more innovative tools – and targets who might be more willing to trade tighter deal protection for enhanced deal certainty.
Warranty and indemnity insurance
Warranty and indemnity insurance (W&I Insurance) has been a feature of private M&A for a while, but we are seeing a gradually increasing trend towards its use in public M&A, particularly with deals involving private equity funds. In the absence of W&I insurance in a public M&A deal, given the target giving the warranties under an implementation agreement is acquired, there is no post-acquisition damages remedy available to the bidder for a breach of warranty (unlike in a private M&A deal where the bidder can make a warranty claim against the sellers). W&I Insurance provides that coverage to a bidder and enables the bidder to seek an expanded set of business style warranties from the target.
- The WA government has called for formal expressions of interest for Landgate, the state-owned land registry group by 12 February 2019. The State is seeking a private partner to run its digital land register for the next 40 to 50 years, including exclusive rights to provide, maintain and improve its automated titling and plan services.
- Global gold mega-mergers in Newmont/Goldcorp and Randgold/Barrick continue to drive speculation about Australian miners closer to home. Newcrest’s Chief executive, Sandeep Biswas has noted that Telfer continues to be an attractive asset due to its remaining gold resources. And with the A$ gold price near record highs, we expect the sector to be very active for both M&A and ECM.
- Of interest to many local players, the WA State Government has released it “Future Battery Industry Strategy” for Western Australia, based around the four pillars of investment attraction, project facilitation, research and technology sector development of adoption of battery technology opportunities.
Quarterly Publication Review
ASIC's report 605 – Allocations in equity capital transactions
It's a time of much uncertainty for the equity capital markets community as a result of the cases being brought by the ACCC and ASIC in relation to the ANZ capital raising in 2015. ASIC’s report 605 gives almost no guidance on when disclosure is required in relation to a shortfall, however, it does give guidance on two important issues: allocation processes and bookbuild messaging. Read More
G+T in the community
On 23 February 2019, four intrepid swimmers from G+T’s Perth office including Corporate Advisory partner Justin Mannolini and paralegal Jack Bannister, will take part in the 2019 Rottnest Channel Swim. The Rottnest Channel Swim is a 19.7km open water swim from Cottesloe Beach to Rottnest Island.
This is the first time G+T is participating in the swim and the team will be raising money for Beyond Blue, in support of the amazing work it does in the mental health space in Australia.