Barclays Sleepless in Sydney as India Firms Seek Coal Deals to Fuel Growth
Surging Indian demand for Australian assets such as coal mines will help drive an increase in takeovers in the South Pacific nation, according to Barclays Plc (BARC), Australia’s top-ranked merger adviser.
The value of takeovers in the country in the second half will surpass the tally for the first six months as the pursuit of natural resources intensifies, said Daniel Janes, the Sydney- based head of mergers and acquisitions for Australia at Barclays Capital.
“The sheer weight of the inflow of opportunities is keeping me awake until two or three in the morning,” Janes, 38, said in an interview. “We’re seeing a very strong pipeline of international acquirers of national resources for Australia. There’s strong interest from India.”
Bandanna Energy Ltd. (BND), Wesfarmers Ltd. (WES) and Linc Energy Ltd. (LNC) are among Australia-traded companies selling coal assets as India and China use more of the fuel to help power their economies. Energy, mining, steel and iron-ore deals involving Australian companies reached $20.2 billion in the first half, the most for that period since at least 1999, according to data compiled by Bloomberg.
“It’s a seller’s market,” said Matthew Trivett, a Brisbane-based analyst who specializes in coal producers at Patersons Securities Ltd. “I don’t think interest is going to dissipate, but whether deals come to a head might depend on the macroeconomic environment and the dollar.”
The value of announced takeovers involving Australian companies reached $55 billion so far in 2011, according to Bloomberg data, the most for that period since 2008.
Companies are targeting Australian assets even after the economy contracted in the first quarter by the most in 20 years and the nation’s currency surged 30 percent against the dollar in the past 12 months.
Barclays Capital, which last week named Cynthia Whelan as chief executive officer of its Australia and New Zealand operations, leads JPMorgan Chase & Co. and UBS AG in advising on mergers involving Australian companies this year, Bloomberg data show.
“There’s a lot of activity that’s been bubbling below the surface that will come through over the next six months,” Janes said in the June 3 interview. “I would specifically single out coal.”
Bandanna has climbed 35 percent in Sydney trading this year even as the country’s benchmark S&P/ASX 200 index dropped 3.8 percent. Linc has gained 13 percent. Carabella Resources Ltd. (CLR), a coal explorer with assets in Queensland, has soared 72 percent.
Indian Prime Minister Manmohan Singh aims to add 120,000 megawatts of power generation capacity by 2017 to reduce blackouts during peak hours that threaten to slow the country’s development. Australia, the world’s biggest coal exporter, is helping plug that deficit.
Lanco Infratech Ltd., the Indian electricity producer controlled by billionaire L. Madhusudhan Rao, bought Australia’s Griffin Mining Co. this year and is examining a bid for the Premier Coal unit of Wesfarmers, the Hyderabad-based company said last month.
NTPC Ltd., India’s biggest power producer, is preparing to make a binding bid for Bandanna Energy or its assets, two NTPC officials said last month. Carabella Resources said May 30 it hired UBS to prepare for takeover offers after receiving interest from prospective buyers.
Adani Enterprises Ltd., India’s biggest coal importer, agreed on May 3 to pay A$1.8 billion ($1.9 billion) for the Abbot Point terminal in Australia’s Queensland state, after buying a Linc Energy coal asset for about A$3 billion in August.
Barclays Capital was second behind Morgan Stanley last year among arrangers of takeovers involving Indian companies globally, advising clients including Reliance Industries Ltd. and Bharti Airtel Ltd., according to Bloomberg data.
Coal isn’t the only product driving takeovers in Australia. Mexican brewer Grupo Modelo SAB de CV and Molson Coors Brewing Co. have been exploring a possible joint bid for Foster’s Group Ltd., people with knowledge of the matter said last week. Foster’s has a market value of A$8.8 billion.
Spotless Group Ltd., a Melbourne-based corporate-services provider, last month rejected a A$657 million bid from private- equity firm Blackstone Group LP.
Still, suitors are taking more time to decide whether to commit to a purchase, according to Janes. Whitehaven Coal Ltd. last month ended talks for a potential sale, seven months after putting itself on the block, saying bids didn’t reflect the value of its assets.
“Acquirers are taking longer, going into more detail, and being more comprehensive on risks,” he said.
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