The prospects of Australia’s initial public offering market are looking up following Japara Healthcare’s $450.4 million book build Friday that was two times oversubscribed, people involved in the IPO and those working in equity capital markets told Data Room.
Macquarie, sole underwriter of Japara, and other investment banks are now more confident about the IPO market in 2014 after the setback of Sterling Early Education and Mantra IPOs being pulled. The top underwriter of Australian IPOs in 2013, Macquarie has a pipeline of potential IPOs in the healthcare, online, technology and industrial sectors.
Some of Macquarie’s mandates may become M&A deals as private equity firms have hired Macquarie and others to explore so-called dual track sales of their portfolio companies: an IPO or a sale to another company.
After bullish predictions of a heady 2014 market for IPOs, volumes are less in the year to date than for the same period last year. Nine IPOs have been priced and two are trading so far in 2014, according to Bloomberg data. In the same period last year, 12 IPOs were priced and eight were trading.
Japara, a residential aged care company, is the biggest Australian IPO to date this year.
Its book build was bought forward 12 days after a group of mainly Australian-based fund managers pledged to cornerstone the deal ahead of a planned April 16 underwriting date.
Such demand led to the sale of 225.2 million Japara shares at $2 each, or 10.4 times 2015 forecast earnings before interest, tax, depreciation and amortisation, people involved in the IPO said.
Japara’s market value is estimated at $525m. The company is an amalgamation of two companies, a property and an operating company, which will be brought together by the IPO. Some investors will roll over their investment in one of the two companies into the new Japara and others will exit.
The company has 35 residential aged care facilities with 3,131 places and has ambitions to have as many as 5,000 places. Australia’s residential aged care sector has estimated revenues of $11.6 billion per annum. Residential aged care places are forecast to increase to 260,000 places in 2022 from about 186,000 places at present.
Japara is expected to begin trading on the ASX on April 17.
In other pending IPOs, 360 Capital Office Fund, Acorn Capital Investment Fund, Genesis Energy and Beacon Lighting Group are also all slated to list in April, according to the ASX.
(Reporting by Brett.Cole@businessspectator.com.au)
(Editing by Miranda.Maxwell@businessspectator.com.au)