Judo Bank float looms as interest rises

Judo Bank co-founders Joseph Healy and David Hornery. Picture: Elke Meitzel

Business bank Judo is about to fire the starting gun on its initial public offering, scheduling investor meetings in about two weeks’ time.

The bank is popular with investors due to its old-school lending approach and highly experienced management team, and the IPO is expected to be a strong performer when it heads to the boards by December.

Citi, Goldman Sachs, Credit Suisse and Barrenjoey Capital Partners are working on the $3bn-odd listing.

Judo had deposits of $2.29bn and loans of $3bn as at April 30, according to the Australian Prudential Regulation Authority.

The bank had a record month in May. It has a business pipeline of more than $2.5bn and is targeting a loan book of more than $10bn in the medium term.

The IPO market had cooled in recent months after floats including Nuix, Australian Clinical Labs and Pepper Money failed to fire.

But the reasonable performance of the last two major IPOs, copper miner 29Metals and electronic real estate settlements business Property Exchange Australia, could encourage others.

Australian mergers and acquisitions activity has hit $110.9bn for the year to date, nearly eight times higher from the same period last year, according to Refinitv.

The large pool of capital held by private equity and superannuation funds is making its mark throughout the market.

Many believe this will lead to far more attempted buyouts of listed groups in the months to come, particularly in the infrastructure space.

Judo has had funds queuing up to provide capital before it starts life as a public business.

Some say that the bank does not need to hit the public markets to find funding since there is a lot of private money looking for an opportunity at a time of low interest rates.

But the understanding is that the bank sees a public listing as way to provide it with funding options in the future.

Already, Judo has raised $1.2bn in two years.

Private and institutional investors including Bain Capital Credit, Myer family investments, the Abu Dhabi Capital Group, Ironbridge, SPF Investment Management, OPTrust, and Tikehau Capital have participated in Judo’s funding rounds.

The demand by super funds for solid Australian-listed businesses was shown last week with an IFM-led consortium offering $22.3bn to buy Sydney Airport in what is arguably the largest buyout proposal by enterprise value in Australia.

The consortium includes QSuper and the US-based Global Infrastructure Partners.

While the $8.25 per share bid is likely to be rebuffed, some believe it is just the start of an IFM campaign to take one of the country’s most valuable assets private.

Sydney Airport might allow due diligence if a higher offer is received.

It was trading at about $8.80 before the coronavirus pandemic curbed international travel, but given the highly dilutive capital raising of $2bn last year, some believe an offer of $8.50 to $9 would see the consortium take control.

Rival bidders could also enter the frame.

Given a number of large super funds in Australia already own airports, most believe the two best placed to lob rival approaches are Aware Super and Macquarie Infrastructure and Real Assets.

A foreign suitor can own no more than 49 per cent under the airport ownership laws.

There have been reports that MIRA is contemplating a rival approach.

Meanwhile, some think that superannuation funds could partner with Telstra to buy the National Broadband Network in the coming years once it establishes a strong earnings pattern.

Sydney Airport shares closed on Friday at $7.75.