Australian IPO market sizzles with big deals still to come

Sun Jun 1, 2014 5:00pm EDT

* Australian IPOs on track for best year in over a decade

* Capital raised five times more than this time in 2013

* Makes floats more attractive for Healthscope sale

* Australia provides bright spot for IPOs in Asia-Pacific

By Byron Kaye

SYDNEY, June 2 (Reuters) - Australian businesses have set a new record for money raised in public floats in the first five months of the year, with larger deals to come putting the country on track for its biggest IPO year since the Telstra privatisation began in 1997.

Companies have raised $2.89 billion in sharemarket flotations in the year to the end of May, more than five times the amount generated in the same period last year, according to Thomson Reuters data.

That makes Australia a bright spot in the Asia-Pacific region generally, where dozens of deals have been cancelled or withdrawn amid volatile equity markets, unrest in Thailand and a cautious approach to approvals in China.

Australia's sharemarket meanwhile is trading at all-time highs, buoyed by historically low interest rates, and recently listed companies like cleaning and catering firm Spotless Group Ltd, which raised A$995 billion ($920.28 billion) in May, have posted strong after-market performances.

Analysts say this is encouraging vendors to go to the market as opposed to selling privately, particularly private equity firms which are looking to exit mature assets they have been holding through less favourable years.

"People keep having these good experiences, they keep looking for the next opportunity to invest in," said Andrew Stevens, joint head of equity capital markets at UBS, which managed Australia's two biggest floats of the year so far - Spotless and Genworth Mortgage Insurance Australia Ltd .

Stevens is working on a possible float of Healthscope Ltd, a hospital owner and operator worth an estimated A$4 billion which is owned by U.S. private equity giants TPG Capital Management LP and Carlyle Group.

The owners are expected to decide this month whether to sell via float or privately.

Another float that could fetch A$4 billion is the planned sale of state-owned health insurer Medibank Private, due to list before the end of June next year.

If both proceed in 2014, the year will be the biggest for Australian IPOs since 1997, when the government began its sell-down of telecom Telstra, the Thomson Reuters data shows.

John McLean, the head of capital markets origination at Citi in Sydney, said that rather than being a bubble, the rush of IPO activity was due to a cocktail of previously withheld supply and the quality of businesses that are on offer.

"I don't think it's too good to be true ... We've had fairly subdued levels for a number of years, other than the second half of last year," he said.

IPO activity in broader Asia remained subdued "so Australia has become a bit of a highlight regionally", he added.

The reopening this year of equity markets in mainland China after a 14-month hiatus and increased activity in Hong Kong is set to boost listings in the region, although initial expectations for a boom in China IPOs are being scaled back as regulators have been tentative about approvals.

IPOs in Singapore have had a slow start while in Thailand, where the military launched a coup last month, volumes have plunged in the year to date.

In Australia however capital raised in IPOs so far in 2014 is more than that raised in all of 2011 and 2012 combined.

($1 = 1.0812 Australian Dollars) (Editing by Stephen Coates)