Public Storage continues to work on the $1.9bn takeover bid for National Storage REIT, but other deals in the market are now facing less certainty following this week’s panic selling on the sharemarket.
It is understood it’s business as usual for investment bankers at Morgan Stanley, which is currently putting together the paperwork for the US-based bidder that has offered $2.40 per share for its Australian rival. However, some continue to question whether a deal will proceed on the same terms.
The general consensus is that for merger and acquisition deals, challenges accessing financing from the US debt markets will likely remain the greatest deterrent for transactions completing, although much of this depends on the extent of the fallout of the coronavirus threat.
Weighing in favour of a National Storage REIT sale completing is that Public Storage is cashed up and not reliant on the debt markets.
The Australian dollar has also fallen to US65c from US70c at the start of the year, so should it retain its current price for the company, it is effectively picking up the business cheaper.
It also faces the potential competition, with Warburg Pincus and Gaw Capital both earlier showing interest in the business.
However, some observers say a sale completing at a lower price is the best case scenario, with challenges trying to justify a takeover to their listed investors in the current market conditions.
But there is general consensus that a takeover of National Storage faces a greater chance of succeeding than other merger bids currently afoot.
Expert deal makers believe Couche Tard will be taking its time to assess the merits of an $8.8bn acquisition of Caltex, which on Monday faced share price declines of up to 17 per cent on the back of the oil price fallout, with the market value now at $6.7bn.
However, on the flipside, the lower Australian dollar will benefit the Canadian bidder and the fundamentals of the business remain the same.
Couche Tard executives are in Australia currently inspecting Caltex assets.
Private equity faces the biggest challenge when it comes to M&A, which is more reliant on the US debt funding market.
It leaves many questioning what this will mean for theme park and cinema chain owner Village Roadshow and healthcare provider Healius.
European-based fund Partners Group is bidding $2.1bn for Healius and doubts are increasing that a deal will complete, while Village, which is being bid for by local funds BGH Capital and Pacific Equity Partners, could be hard hit by a decline in international tourism, although this could be offset by more local visitors to its Gold Coast theme parks such as Sea World.
Another possibility is that should the situation worsen, private equity groups could lob low-ball offers that are accepted by investors desperate to recoup some losses.
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