Australian M&A surge to continue in 2011, regulators play hard

SYDNEY Thu Feb 24, 2011 2:10am EST

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SYDNEY (Reuters) - Resources and media firms are expected to dominate a surge in corporate takeovers involving Australian companies in 2011 but regulators may play hard ball when looking at high-profile deals, leading bankers and lawyers say.

The deal activity which ranked Australia as the third-biggest mergers and acquisitions market globally last year was gathering pace so far in 2011 as access to capital improved and boards came under growing pressure to grow earnings, they said.

"We are seeing activity and it does look like the momentum in the second half is continuing," Greenhill Caliburn managing director Roger Feletto told a Financial Services Institute of Australia conference in Sydney.

He singled out Australia's media sector where a string of recent deals, including West Australian Newspapers' $2 billion bid for Seven Media this week, were expected to pave the way for more consolidation as advertising markets recover and firms seek to tap new sources of digital revenue.

Mid-tier miners were also likely to dominate domestic consolidation and as targets for foreign companies while there may be some activity in the agri-business and telecommunications sectors, he said.

Gaming group Tabcorp Holdings and brewer Foster's Group would also be in the spotlight as they prepare to split their businesses.

Australia's proximity to Asia and its stable political environment and regulatory track record continued to make it attractive to foreign predators.

However, this could be partly offset by increasing levels of scrutiny from regulators, particularly for high-profile or politically sensitive deals.

Nicola Yeomans, a partner at law firm Freehills, said changes in senior policy offers and other officials at regulatory bodies such as the Australian Competition and Consumer Commission (ACCC) and the Foreign Investment Review Board (FIRB) had changed the regulatory landscape.

"There is a real jump in regulatory activity. We think that is mainly due to a changing of the guard," she said.

While in many cases there were greater levels of scrutiny, regulators were also getting more creative rather than blocking deals outright.

Among the high-profile deals awaiting regulatory approval is Singapore Exchange's $7.9 billion bid for Australian peer ASX Ltd.

UBS co-head of mergers & acquisitions Daniel Klejin said access to funding was improving as risk appetite returned but lenders remained cautious on some terms and conditions.

"It is definitely getting easier to get money from banks or debt capital markets," he said.

Klejin, who is currently advising miner Riversdale on its bid from Rio Tinto, also said large strategic investors in mining firms would make resource deals more complex.

(Editing by Lincoln Feast)

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