European banks beef up for Australia infrastructure sale bonanza

[SYDNEY] European investment banks that scaled back in Australia after the global financial crisis are scrambling to rebuild advisory and financing teams, keen for a slice of A$90 billion (US$94.20 billion) worth of privatisations expected in the next three years.

Australia's government has been pushing states to sell ports, energy generators and electricity networks to pay down debt and fund new public works. Privatisations in the pipeline could generate combined bank fees of more than US$1 billion, according to Reuters estimates. "As we look at pan-Asia Pacific investment banking opportunities for the next 24 months or so, Australian infrastructure would be one of the very top areas of interest,"said Richard Satchwell, co-head of investment banking at Barclays Australia.

With investors focused on countries possessing high credit ratings and transparent, independent legal systems, Australia is "very much at the heart of things," he said.

The UK investment bank has added headcount and shifted the focus of some senior bankers to prepare for such deals, although it declined to provide details.

Royal Bank of Scotland has created a new three-man infrastructure and acquisition finance team, a person with direct knowledge of the matter said. Societe Generale is hiring some bankers for its Australian energy and resource lending business, a separate source familiar with the matter said. "We have our energy & natural resources team in Australia and we have remained active over the years," a Societe Generale spokeswoman said in an email. RBS declined to comment.

European banks will, however, have a way to go compared to the strongest investment banking teams in Australia.

Last year, announced M&A deals involving Australian firms jumped 16 per cent to US$116 billion, Thomson Reuters data shows, with an A$7 billion toll road firm sale by the state of Queensland the top ranking privatisation and second-biggest deal overall.

Advisory fees for completed deals soared 53 per cent to US$626 million, according to Thomson Reuters/Freeman Consulting Co estimates. No European bank made the top five which accounted for half of all fees earned. Goldman Sachs led the fee rankings with US$97.1 million.

Also bulking up is France's Natixis, which shut up shop in Australia in 2012 but says it has since rehired a project finance banker and transferred a senior infrastructure banker from Canada.

Rothschild, one of the few European banks not to cut Australian headcount after the global financial crisis, clinched a high-profile hire last year - that of Danny Bessell, a former Goldman Sachs banker for utilities and infrastructure, to manage its privatisation work.

It has since won a role of lead financial advisor to Western Australia on the A$2 billion sale of two ports.

With Australian M&A bouyant overall, US firms are also wading in. Evercore Partners this week announced an alliance for cross-border M&A advisory services with a new firm formed by three local investment bankers. Last month, US investment bank Houlihan Lokey opened an office in Sydney.

There are, however, risks to the bullish outlook for A$90 billion worth of privatisations. That figure would have been A$40 billion bigger but for a shock weekend election result in Queensland, where the Labor-led opposition is poised to win power on promises to take those asset sales off the table.

Assets expected to be sold this year include a stake in New South Wales state's energy grid and as well as several shipping ports. Victoria state has kicked off with the A$5 billion sale of the Port of Melbourne, which is expected to attract local funds such as Industry Funds Management and Queensland Investment Corporation.


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