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As Australia shares languish, private equity swaps IPOs for trade sales

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As Sydney shares reel from China's stock gyrations, Australian private equity firms are going for safety over risk, selling assets to trade buyers rather than trying potentially dicey initial public offerings (IPOs).

[SYDNEY] As Sydney shares reel from China's stock gyrations, Australian private equity firms are going for safety over risk, selling assets to trade buyers rather than trying potentially dicey initial public offerings (IPOs).

Private equity-backed trade sales so far in 2015 are worth more than in each of the previous three complete years, with US$1.42 billion worth of deals up to mid-September, Thomson Reuters data shows.

With Sydney shares off nearly 8 per cent so far in 2015, many with assets to sell prefer to sit tight for now and hope for better market conditions ahead. So far this year, IPOs backed by private equity have shrunk to US$1.47 billion, a far cry from full-year 2014's record US$6 billion. "Institutions are becoming more selective, largely as a result of poor performance over the last three months, last six months," Macquarie Group's head of private equity, Jeremy Tasker, told a conference in Melbourne earlier this month.

"There is a bit of a negative view towards IPOs." Among private equity-backed listings that did go ahead are the two biggest Australian IPOs of 2015, software firm MYOB Ltd and fruit and vegetable supplier Costa Group. With both trading well below issue prices, a host of anticipated listings have been cancelled or delayed pending fairer market conditions which are yet to materialise.

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