Australia to eclipse 14-year M&A record, powered by infrastructure, resources deals

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HONG KONG, Sep 30 (Businesshala) – Australia is gearing up for its best year in M&A activity despite an extended pandemic-induced lockdown in its most populous states, as cash-rich corporates and funds scoop up assets, Bankers see no sign of momentum. slow.

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Data from Refinitiv showed deals involving Australian companies totaled $329.2 billion in the first nine months of 2021, nearly six times year-on-year and more than the amount in the same period of the previous three years. The previous annual record was $139 billion in 2007.

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Volumes were driven by a number of mega deals targeting listed infrastructure and resource firms.

These include BHP Group’s (BHP.AX) proposal for the $86 billion amalgamation of its dual-listed company structure and the $14 billion sale of its petroleum business to Woodside Petroleum (WPL.AX).

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Bankers said infrastructure assets in Australia were particularly attractive to retirement and pension funds, which are eager to deploy their low-cost capital for steady, long-term gains.

“Investors in semi-regulated infrastructure assets have high confidence in the future cash flows of the assets they are buying,” said Nick Sims, co-head of investment banking at Goldman Sachs (GS.N) Australia.

Goldman leads the league table for announced M&A deals in Asia Pacific, followed by Morgan Stanley (MSN) and UBS (UBSGS).

“Rates are going to be low for the foreseeable future, if they do go up it will be slow, so infrastructure investors are investing with the longer term,” Sims said.

The deals were made while several states in the country are in and out of strict lockdown since the onset of COVID-19.

Citigroup’s Alex Cartel said, “The uncertainty around the lockdown and the demand side has really prompted corporate leaders to do a strategic reset.” Australia Head of Investment Banking.

“You had many corporates, private equity funds, sovereign wealth funds with access to capital markets, who had strategic ambitions, who have said let’s go.”

‘pent-up demand’

According to Refinitiv data, deals targeting Australian companies, at $200 billion, made up 20% of the region’s total value, the second highest after China, compared to just 4% in the same period last year.

Tom Barshaw, Bank of America’s (BAC.N) co-head of M&A in Asia Pacific, said Australia represented “a real change” in the overall relative contribution to the Asia Pacific volumes.

“A number of factors are coming together, including some stagnant demand since last year. The level of cross-border activity is also remarkable. I don’t see any signs of activity slowing down.”

US payments firm Square Inc (SQ.N) made its biggest foray of the year into Australia with its $29 billion acquisition of local fintech firm Afterpay (APT.AX) in August.

Data from Refinitiv showed that overall Asia Pacific deals reached a record $1.25 trillion from January to September, up 46% year-on-year, with Southeast Asia and private equity-backed transactions also hitting new highs.

Samson Low, head of Asia M&A at UBS, said more assets owned by private equity firms were set for sale, while mergers between special purpose acquisition companies (SPACs) and their targets would likely be another volume driver.

“Also, China may well back out with outbound deals by state-owned companies,” he said. “2022 could be another setback year for M&A.”

Reporting by Ken Wu and Scott Murdoch; Editing by Sumeet Chatterjee and Muralikumar Anantharaman

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