Firms To Delay Public Listings in 2008

Tuesday, 1 January 2008

DEAL-MAKERS at powerful investment bank UBS expect companies to delay listing in 2008, remaining private and boosting their asset base before launching on to the volatile public market.

Scott Murdoch | 'The Australian' Online January 01, 2008

The Alternative Capital Group at the bank, headed by former hedge fund sales boss Robbie Vanderzeil, will today mark its first year of operation in the Australian marketplace.

The group, supported by Amelia Hill and David Feldman as directors, was set up to replicate similar UBS operations in London and the US.

In the past year, the group has participated in the financing of deals worth between $20 million and $50 million each, predominantly in the technology and resources sectors.

Mr Vanderzeil said the division aimed to source funding from a group of investors, mainly hedge funds, to pump into companies one to two years from listing.

He said the fallout from the credit crunch would continue, and could cause some companies to hesitate from listing on the public market.

League tables show that there was $8.29 billion worth of new listings in the Australian market in 2007, with the top 10 deals worth $5.34 billion.

The largest floats were Boart Longyear, RAMS Home Loans and the successful investment manager Platinum.

"The idea of alternative capital in the initial phase is providing liquidity, providing finance to situations which are not necessarily of appeal to private equity," Mr Vanderzeil said.

"It's the gap between private equity and public markets.

"A lot of people said 'why do we need alternative forms of capital when there's such an abundance of capital?'. A lot has changed in 12 months."

Mr Vanderzeil said part of the sub-prime fallout was that investors would become more discerning with their investment decisions in the year ahead.

He said hedge funds' enthusiasm for investing in pre-float companies had not waned because of the credit crunch.

"We have found a hiatus or a slowdown while people marked their positions, particularly the stuff that they had in mezzanine debt," Mr Vanderzeil said.

"The flexibility of hedge funds has been demonstrated.

"The better hedge funds have been able to take short positions in sub-prime and hedge their portfolios very effectively."

The year ahead for public floats on the Australian market appears bleak, after the Medibank listing was shelved by Labor and MBF's trade sale to BUPA.

Two floats in the past week, Primeag Australia and New Guinea Energy, have struggled in the quiet holiday market.

Fellow director David Feldman said some companies could benefit from syndicating finance with investment partners before turning public.

"There is a phenomenon, largely in Australia, that we have a lot of small brokers who bring companies to market earlier or a stage earlier than the equivalent in Asia," Mr Feldman said.

Ms Hill said the deal flow of potential floats was quiet at the moment.

"It's interesting because there are very few large IPOs; in terms of the total number of IPOs it's nothing if you look at even the South American markets," she said.

"The market is almost starved of IPO opportunities, which means the pricing and demand is quite tight. Next year will be particularly interesting."