TPG Capital appears to be setting itself up to gain the confidence of investors in a quest to exit two major holdings by the end of the year.
Last night, the global buyout firm set the market value range for the float of its poultry producer, Inghams Enterprises, at between $1.3 billion and $1.5bn.
The business is scheduled to float just days ahead of the $3.3bn-plus Alinta Energy, of which TPG holds a stake of between 20 and 30 per cent. The details for the offering will be mulled over by fund managers at lunches held today.
A prediction among market analysts has been that the buyout firm would conservatively price Inghams to achieve a strong result so investors will also back the Alinta offer, considered by some as a more challenging proposition to sell to investors.
As TPG releases the prospectus for Inghams today, it is expected to tell investors it will sell between 50 per cent and 70 per cent of its investment, likely taking the IPO to between $650m and $1.05bn.
The price range for Inghams equates to between 13.5 times and 15.5 times the company’s forecast annual earnings, which offers similar value for the IPO of its smaller rival across the Tasman, Tegel Group.
Many believed Tegel was conservatively priced when it listed earlier this year.
Net profit for Inghams is expected to grow 19 per cent for the 2017 financial year, with volume growth of 7.7 per cent over the same period.
Fruit and vegetable company Costa listed last year at a value that equated to 18 times its forecast earnings, and the latest price range for Inghams places it on a similar footing to Tegel Foods. But some argue Tegel is not a relevant comparable, given it is a quarter of the size of Inghams and growth in the New Zealand market is far less and that Costa is a more reliable comparison.
Ingham’s pricing is also below the average for listed Australian top 200 companies at 16 times their forecast earnings, which average annual earnings of about 7.7 per cent.
TPG Capital bought Australia’s largest poultry producer from the Inghams family in 2014 for close to $900m and sold the its properties soon after for about $600m.
According to forecasts, the operating business will generate a 13.5 per cent lift in its earnings before interest, tax, depreciation and amortisation to $190.1m for the 2017 financial year.
Annual net profit is expected to grow by 18.9 per cent from fiscal 2016 to $98.8m.
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