The Chinese government and the nation’s private investment heavyweight are positioning themselves to secure a grip on more than $18 billion worth of Australia’s most prized assets, with Rio Tinto’s coalmines believed to be the latest that have caught the eye of buyers from the Asian super power.
It comes as the state-owned China Investment Corporation and its bidding partner, LaSalle Investment Management, were firming last night as the most likely winners of the contest to buy Morgan Stanley’s $8.9bn Investa Property Group platform.
The process, run by investment banks Morgan Stanley and UBS, was expected to reach a critical point this week, with one or two of the five bidders that went through to the second round expected to be selected to embark on exclusive negotiations with the prominent office landlord.
Investa directly owns office towers that have a face value of $1.9bn but may fetch close to $2.4bn, implying a net yield of between 5 per cent and 6 per cent.
The management platform is said to be worth about $180m.
The Citi-advised CIC and LaSalle consortium began emerging as the favoured candidate to win last week, as flagged by DataRoom, after five bidding groups were originally short-listed.
But while participation from the Chinese has intensified competition in the real estate arena, they also remain a legitimate force for deal-makers in mining and infrastructure.
State Grid and China southern, the country’s two largest state-owned power companies, are expected to bid strongly as part of consortiums for the NSW government’s $6bn electricity network, for which expressions of interest were due yesterday.
Sources say competition is also likely to come from buyers out of China for Rio Tinto’s $4bn-odd portfolio of coal assets in NSW, despite Glencore and X2 currently weighing a potential purchase.
Fosun, the country’s largest privately owned conglomerate, recently weighed up a potential investment in Fortescue Metals’ Chichester Hub, a move that could have offered some relief to the miner from its hefty debt pile.
Like X2 and Glencore, Fosun’s interest will be to capitalise on the low point in the cycle due to weakness in the coal price, as Rio continues to narrow its focus to iron ore, suggesting that it may emerge as a third contender.
Rio has made previous attempts to sell coal assets in the state before, and it recently tried to sell its Pacific Aluminium operations through adviser Credit Suisse. Fosun is also being called on by other Chinese-owned mining companies to offer support as a co-investor, according to sources.
Other Australian miners struggling to repay loans are also believed to be on the radar of the Chinese.
This article first appeared in The Australian Business Review.