KKR’s Bis Industries Scraps Plan for Australian Share SaleBrett Foley
KKR & Co.’s Australian mining services company Bis Industries Ltd. scrapped plans for an initial public offering, citing “unfavorable market sentiment” toward resources stocks.
The decision was made because of “broader market concerns about the resources sector” and companies servicing that industry, Bis Chief Executive Officer Ian Lynass said in an e-mailed statement today. The company started marketing the IPO this month to raise as much as A$510 million ($465 million), two people familiar with the matter said Nov. 11.
Bis Industries, a provider of logistics services for miners including Fortescue Metals Group Ltd., was one of more than a dozen companies planning Australian IPOs before year-end. KKR was seeking to join private equity firms including Apollo Global Management LLC and Pacific Equity Partners in listing companies they own in the country.
“People are hoping the worst for mining services companies is over, but no one is really sure and that creates a pretty uncertain environment,” said Tim Schroeders, who helps manage about $1 billion at Pengana Capital Ltd. in Melbourne. “Contractors are in oversupply, and big mining companies are seeking to cut rates on existing contracts.”
Companies including BHP and Rio Tinto Group are cutting staff, delaying mines and curbing takeovers as the China-led commodity boom that drove iron ore prices to records begins to wane. The value of mineral and energy projects being developed in Australia, the world’s biggest iron ore exporter, fell 10 percent in the past six months to about A$240 billion, the government said today.
The Reserve Bank of Australia said this month mining investment will continue to decline from the record reached in the past year and may drop more than previously anticipated.
WorleyParsons Ltd., another Australian resources contractor, fell by a record 26 percent Nov. 20 after saying profit will be less than a forecast given last month. Seven Group Holdings Ltd. said Nov. 12 it would cut about one in six jobs in its WesTrac division, which sells Caterpillar Inc. equipment, with earnings forecast to fall as much as 40 percent from a year earlier.
Ore with 62 percent iron content delivered to the Chinese port of Tianjin has fallen 6.2 percent this year to $135.90 a dry ton, according to The Steel Index Ltd. The steelmaking ingredient may fall to $110 a ton by year-end as demand slows, Westpac Banking Corp. said in a report yesterday.
“We recognize investor sentiment is not currently conducive to an IPO, and therefore have elected not to proceed at this time,” Lynass said.
Private equity firms were seeking to raise as much as A$2.5 billion by exiting Australian investments through IPOs in the next six months, according to data compiled by Bloomberg. About a dozen companies plan to list on the nation’s exchange by year-end as business confidence surges, Commonwealth Bank of Australia’s executive director of capital markets Mike Neal said in October.
New York-based KKR planned to keep a stake in Bis Industries of as much as 52 percent, according to the people familiar with the IPO. UBS AG, Goldman Sachs Group Inc. and Bank of America Corp. were advising Bis on the share sale, the people said.
KKR used debt to buy Brambles Industrial Services and Cleanaway from Brambles Ltd. in June 2006, according to the company’s website. The following year, KKR sold the Cleanaway waste disposal business and the remaining assets, including coal handling and haulage, steel processing and storage, logistics and distribution services, were renamed Bis Industries.