Nothing like a couple of fat takeovers and buyouts to lift the stock markets’ animal spirits – hundreds of millions for investment bankers and brokers, scores of billions thrown at investors who must find somewhere else to put their money.
And when deals real and imagined are being counted in double figures, those animal spirits start loosening the bars on the cages. We already have the dodgy property developers collapsing.
Overnight KKR announced the world’s second-biggest leveraged buyout – some US$29 billion for credit card processor First Data. It’s just one of a dozen or so mega-LBOs already done or underway this year.
And Australia is in the thick of it. With our tendency towards duopolies, tax-free profit for foreign investors and local private equiteers stepping up a grade to compete with the foreigners, the market is very ripe indeed.
At $20 billion and $11 billion respectively, the headline acts remain Coles and Qantas. With the Coles saga starting a new chapter last night with Wesfarmers’ raid and the stock now suspended from trading, that massive cash injection seems much closer.
And, if the Airline Partners Australia consortium isn’t trying to mislead the market with leaked suggestions about reducing its minimum acceptance provision, there’s another motza on the way.
But let’s not forget the many others – the Macquarie Bank/Babcock and Brown fight over the Alinta spoils, Flight Centre’s renewed private equity flirtation, Rebel Sport just completed, Veda Advantage recommended yesterday, Bank of Queensland’s bid for Bendigo Bank, whatever’s happening at Multiplex, Transurban buying Sydney Roads and so down a list of 49 current takeovers/schemes of arrangements/foreshadowed offers provided by broker Tom Elliott for Eureka Report.
And then there’s whatever happens to media stock when the starter’s second gun goes off tomorrow. Southern Cross Broadcasting, Ten, West Australian Newspapers and NBN are either for sale and likely to be bought, after which greater speculation takes over.
It becomes a heady mix. Once the deals start rolling with such vigour, there is a very real danger that takeover fever takes hold, the freed up cash adding fuel to Australia’s superannuation investment fire. It promises to be a very interesting 2007 – or 1987 revisited.