January 19, 2007 / 2:55 AM / 11 years ago

UPDATE 1-Macquarie targets A$2 bln Boart Longyear IPO-source

(For more IPO news, data and diary, click on <AU/IPOMENU>) (Adds details, background)

By Denny Thomas

SYDNEY, Jan 19 (Reuters) - Macquarie Bank Ltd. MBL.AX is planning an Australian listing for oil drilling services group Boart Longyear in early April, which could have a market value of up to A$2 billion ($1.6 billion), a source familiar with the deal said on Friday.

The source said Goldman Sachs JBWere and UBS will work alongside Macquarie Bank to sell the deal. Macquarie officials were not available for comment.

"Pre-Easter should be the listing and we are marketing it in March. That is the broad plan," said the source, who declined to named.

Macquarie Bank invested A$93 million for a 17 percent stake in Boart Longyear in September last year. Private equity investors Advent International and Bain Capital acquired the group in July 2005.

Despite being a U.S.-based company, Boart Longyear would be listed in Australia. Information on the size of the stake to be sold in the IPO was not immediately available.

"They have looked at doing a U.S. or Australian listing. Given the number of peers in the Aussie market, it makes sense listing it down here. And the global investors would still play a mining services company," the source added.

Some 113 companies raised a total US$5.5 billion in Australian IPOs last year. That was half the previous year's tally, but including follow-on offerings the deal value surged to US$33.3 billion, helped by the government's sale of a third tranche of Telstra Corp. Ltd. (TLS.AX) shares.

While many analysts expect commodity and oil prices to pull back from historic highs in the year ahead, fund managers say Boart Longyear could still garner a good response thanks to its exposed to the drilling business.

"They are less dependent on commodity prices and more dependent on the general volumes in the industry," said Ken West, a portfolio manager with Perennial Growth Management.

"I suppose that will be the theme they will put up," he said. But he added that the soft outlook for commodity prices would still induce some caution, especially after a tepid response to a similar offer last year.

Last July, mining equipment hire company Emeco Holdings Ltd. (EHL.AX) was forced to sell its shares below its marketing range as investors questioned its high valuation.

Emeco has a market value of about A$1.19 billion. Other companies geared to the commodities boom include explosives makers Orica Ltd. (ORI.AX) and Dyno Nobel Ltd. DXL.AX, and mining service group Bradken Ltd. BKN.AX.

JP Morgan analyst Brian Johnson estimates Macquarie could realise a pre-tax and pre-bonus gain of up to A$250 million from the deal.

That was before allowing for any investment banking fees, debt refinancing fees and performance fees from the private equity consortium, he said.

Performance fees have historically been up to 20 percent of the consortium gain, he added.

Macquarie Bank has increasingly been targeting private-equity type deals, where it sinks its own money along with consortium partners, as well as providing investment banking advice.

Macquarie is awaiting government approval to take Australia's top airline, Qantas Airways Ltd. (QAN.AX), private in deal worth about around A$11 billion.

It is also backing a management buyout of power utility Alinta Ltd. AAN.AX, a deal which raised conflict of interest issues and eventually cost the bank its advisory role to Alinta. ($1=A$1.27)

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