Gateway Lifestyle locks in key investors as listing tipped to top $584m

Australia’s largest equity raisings in 2015

Gateway Lifestyle is in the process of locking in cornerstone investors ahead of its plans to list as a public company, with bullish estimates of an enterprise value as high as $584 million.

The manufactured housing park operator is shaping up to be very popular with Australian investors, who are meeting with management this week.

They are attracted to what they say is a high-yielding, defensive play and some describe the business as one where Centrelink is ­effectively the main customer.

It is understood that advisers UBS and Macquarie Capital have been in talks with potential Asian investors and domestic fund ­managers in recent days to lock in cornerstone support, with parties such as Colonial First State among the likely local institutional ­backers.

Advisers are tipped to informally price the deal by Tuesday as part of the cornerstone process ­following management meetings held with investors this week.

Gateway’s 36 parks throughout Australia are owned by investors within three major funds management businesses, including Alceon, which is controlled by veteran banker Trevor Loewensohn and backed by former Babcock and Brown founder Phil Green.

The company recently reached a deal to buy its rival, Tasman Lifestyle, for $137.5m, which is subject to its initial public offering proceeding.

Talks have also been held with Kohlberg Kravis Roberts about a potential sale to the private equity giant for a price tipped to be $567m. However, it is understood that that the company was favouring the IPO route, given its founding managing director, Trent Ottawa, wanted to continue running the business and the time consuming process of securing all the support for a sale from all of the numerous investors within the funds that owned the parks.

Following the completion of the Tasman acquisition, the company will have 5861 approved housing sites for about 6000 residents in 4046 homes.

The deal is also expected to see Gateway’s revenue lift 69 per cent and EBITDA 69 per cent.

Research from UBS analysts presented to investors this week estimates the company will have an enterprise value of between $479m and $584m, equating to 10.4-12.7 times its EBITDA.

The analysts believe the company’s market value will fall within the range of $436m-$542m, equating to 10.5-13.1 times its forecasted annual net profit for the 2016 ­financial year.

The business is being pitched as one that will benefit from the country’s aging population and need for affordable housing.

The company has capacity to expand, with debt levels at a conservative 12 per cent, and plans to add a further 327 sites.

Previously, annual rents have increased 5 per cent on average.

The sale of manufactured homes will account for 48 per cent of the company’s earnings before interest, tax, depreciation and amortisation for the 2016 financial year.

Meanwhile, sources close to Blue Star Group (the company recently re-named IVE Group) have hosed down chatter that the company had opted not to IPO the business, saying its float plans remain on track, with a listing slated to happen as early as next month.

Debt taking its toll

Debt holders on the Queensland tollroad operator BrisConnections have further reduced their exposure to the asset this week, offloading the loans for as little as 50c in the dollar.

The debt was traded by Bank of America Merrill Lynch, sources said. BrisConn, of which Macquarie Group controls a major interest, is soon expected to be placed up for sale after the Australian investment bank offered its blessing for a divestment.

Currently, Fort Street is working as an adviser on the asset alongside receiver PPB, but it is understood that Macquarie could also be lobbying for a mandate to help sell the asset.

Debate is, however, raging about whether offering Macquarie an advisory role would be a conflict of interest.

BrisConnections, which operates the 6.7km Brisbane AirportLinkM7, collapsed with debts of more than $3 billion in 2013, seven months after it opened.

Some financiers on the tollroad had earlier been refusing to sell for less than 60c in every dollar they are owed, 15c more than others would accept.

New York-based Davidson Kempner Capital and Strategic Value Partners were among the hedge funds that had purchased debt off the original lenders for around 50c in the dollar.

NAB’s signal to tap cash

What was interesting about the National Australia Bank’s move to tap the market for $5.5bn yesterday was that it was being viewed by institutional fund managers as a signal that all of the top four banks will follow its move to embark on a capital raising.

In 2009, amid the global financial crisis, NAB was the first to ­embark on an equity raising and all of the others followed. The expectation is the same thing will happen this time around.

Yesterday’s raising was underwritten by Macquarie Capital, Bank of America Merrill Lynch and Morgan Stanley, and it was being touted as the largest ­renounceable rights issue in Australia — one where existing shareholders could purchase the stock at a 16.5 per cent discount to its last closing price.

However, the deal is unlikely to knock Goldman Sachs off its perch after it was this year propelled to the top of the equity capital markets league tables with its mammoth $4.61bn block trade for its client Chevron out of Caltex.

International investors were large participants in the raising, which was deemed to have terms that were relatively friendly to ­retail investors and could set a ­precedent for other raisings in the sector that are likely to follow.

There was a strong contingent of fund managers from offshore at the Macquarie Australia Conference in Sydney, in what is a further sign of the global appetite for exposure to Australian equities amid a low interest rate environment and with a lower Australian dollar.

It is understood that the conference held by the Australian investment bank this week has several hundred investors attending, the largest turnout since the credit crunch in a further indication of the buoyancy of the Australian equities markets.

Infratil eyes Z Energy exit

New Zealand Super and infrastructure investor Infratil may be about to exit their investment in Z Energy via a block trade after the petrol retailer across the Tasman recently reported better than expected earnings.

Z Energy embarked on an IPO on the New Zealand Exchange in 2013. Reports at the time suggested that their equity interest at the time was close to $NZ210m.

However, the parties are believed to have since sold down that interest.