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Foreign buyers swoop on Australia M&A targets, lured by weak dollar

Published 22/09/2015, 04:27 pm
© Reuters.  Foreign buyers swoop on Australia M&A targets, lured by weak dollar
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* Australian dollar has fallen 13 pct so far in 2015

* Inbound deals up 23 pct in value over year-ago period

* Average inbound deal size is at a record

By Byron Kaye

SYDNEY, Sept 22 (Reuters) - Foreign suitors are bidding for Australian companies at a frenzied pace this year, spurred by a steady decline in the Aussie against the U.S. dollar which is turning valuations reasonable.

Last week's $1.6 billion all-cash approach by U.S. credit agency Equifax Inc (NYSE:EFX) EFX.N for Sydney-listed rival Veda Group VED.AX is the latest among billion-dollar-plus inbound takeovers of Australian companies, as a slowdown in the country's top trading partner China weighs on the economy and on its currency which is down 13 percent so far this year.

Australian inbound deals have risen 23 percent by value so far in 2015 compared to the same period last year, Thomson Reuters data showed, as the weak currency added to supportive conditions already created by persistently low interest rates and the prospect of exposure to a mature, growing market.

The average value of Australian inbound deals so far in 2015 is the highest on record at $127 million, up 31 percent on the year before.

"I don't know that (the dollar) has been the sole driver but it has certainly acted as a catalyst," said Douglas Farrell, head of mergers and acquisitions at Citigroup (NYSE:C) Pty Ltd, which is advising Canada's Brookfield Asset Management BAMa.TO in an A$8.9 billion ($6.4 billion) play for freight firm Asciano AIO.AX , the biggest deal of the year.

Dealflow has also been helped by "increased volatility that we're seeing in markets that from a timing standpoint make shareholders a bit more likely to accept a cash bid where there's a strong level of certainty", said Farrell.

A foreign firm was also the acquirer in the second largest M&A deal of the year, where Japan Post Holdings 6178.T bought Asciano's former owner Toll Holdings for A$6.5 billion.

"There is a clear increase in offshore corporates looking to take advantage of the strengthening economic ties between Australia and Asia," said Scott Couzner, the local head of mergers and acquisitions for HSBC Bank Plc, which helped Hong Kong-listed Biostime International Holdings 1112.HK buy unlisted Australian vitamin company Swisse Wellness for about A$1.4 billion in a deal announced on Sept. 17.

"While not the primary factor, the recent fall in the Australian dollar has helped, bridging to a certain extent valuation differences which were otherwise unattainable when the Australian dollar was at parity with the U.S.," Couzner added.

Veda shares rose 2 percent to A$2.68 on Tuesday, just short of Equifax's A$2.70 offer, as investors considered the likelihood the deal will proceed. A Veda spokeswoman declined to comment. ($1 = 1.4017 Australian dollars)

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