Property deals drive NZ M&A activity in financial sector in 2015

Large property and real estate deals have led merger and acquisition, and private placement activity in New Zealand's financial sector for a second year.

The financial sector's $4.51 billion of M&A and private placement deals in the 12 months ended June 30 accounted for about 47 percent by value of all deals in the year, according to the New Zealand Private Equity & Venture Capital Association and S&P Capital IQ's latest market observation report. Of the 109 deals in the sector, Singaporean investment fund GIC's $1.04 billion purchase of Westfield malls and the Canadian Public Sector Pension Investment Board's $998 million acquisition of 18 properties were the largest.

There were 115 financial sector deals, worth $3.54 billion in 2014, making up 47 percent of total activity.

Across all sectors, the number of M&A deals fell 11 percent to 365, while private placement transactions shrank 27 percent to 82, although the value of M&A climbed 26 percent to $8.87 billion, while private placement values jumped 56 percent to $893 million. Over the same period, some $4.29 billion of new equity and debt was listed on the NZX, with a further $2.82 million of capital raised from listed issuers.

The M&A report found most of the deals took place in the first two quarters of the financial year, with activity dropping off through the second half, reflecting increased volatility in global markets, and pointing to "a downward trend since the third quarter," it said. The average deal size rose by a third to $44 million from a historic low a year earlier.

"Moving annual totals of the value of closed deals show that the market has been volatile in FY2015 after a very strong start to the year," the report said. "Transaction activities grew rapidly in the first three quarters, but dropped significantly in the last quarter mainly due to the global economic uncertainty."

Last month, Kiwi billionaire Graeme Hart's Rank Group shelved plans to float Carter Holt Harvey's building supplies business, having already pared back intentions for an initial public offering covering its New Zealand and Australian timber processing and building supplies businesses.

The second most active sector attracting M&A was consumer discretionary, with 79 transactions worth a total $762 million, compared to 85 deals worth a total $700 million. Information and telecommunications M&A and private placements generated 63 deals in the year, down from 70 in 2014, though the value rose to $586 million from $321 million.

The materials sector showed the biggest increase in deal values, rising to $1.21 billion across 15 transactions from $99 million over 19 deals in 2014. The bulk of that activity was through the $1.04 billion purchase of Carter Holt Harvey Pulp & Paper by Japan's Oji Holdings and Innovation Network Corp of Japan.

The biggest deal of the year was the $1.14 billion purchase of Griffin Foods by URC International.

There were five transactions worth more than $250 million, for a total value of $5.26 billion, compared to five deals worth $8.21 billion in 2014. The number of mid-market deals worth between $50 million and $250 million rose to 31 from 18, with stronger valuations driving a 287 percent increase in value to $4.4 billion.

The number of smaller deals worth $50 million of less fell to 185 from 221, with the value of deals falling to $2.61 billion from $2.97 billion.

(BusinessDesk)