RBC analysts back Origin Energy deal for Stockyard Hill

Origin Energy has another $110 million to reduce debt after selling its Stockyard Hill Wind Farm development to China's Goldwind.

Origin Energy has another $110 million to reduce debt after selling its Stockyard Hill Wind Farm development to China's Goldwind. 

RBC Capital Markets analysts told clients it was a "very strong deal" finding a buyer willing to pay $110 million and then sell power from the wind farm back to Origin for less than $60 per megawatt hour. 

"The deal is likely to represent a new low benchmark for a bundled renewable PPA," the analysts told clients.

"...bundled PPA prices have been coming down over the past several years; however, <A$60/MWh including RECs is surprisingly low particularly in the context of current wholesale pricing of >A$80/MWh plus LGC/REC pricing of >A$80/MWh and other recent long-term PPA prices that have been struck."

"The deal highlights two important points: 1) the availability and willingness of cheap capital in the renewables space; and 2) overall downward pressure on wholesale and REC pricing." 

It's the fourth sale in Origin's five-pronged infrastructure asset divestment program, which has already seen Mortlake Gas Pipeline, Mortlake Terminal Station and Cullerin Range Wind Farm sold to new owners. 

Street Talk first flagged Goldwind as an interested party last August. 

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CHAMP out of Dixon Hospitality sale: sources

CHAMP Private Equity has withdrawn from talks to acquire Dixon Hospitality Group, sources said.

CHAMP Private Equity has withdrawn from talks to acquire Dixon Hospitality Group, sources told Street Talk on Monday.

The John Haddock-led firm's departure leaves KKR in pole position to snaffle the pubs group.

Dixon owns 50 leasehold venues, primarily in Sydney, Melbourne and Brisbane and is expected to be worth about $200 million, including debt. 

The company's owners are seeking a private equity investor to tip in growth capital and bring the group back to the ASX boards in a couple of years' time. 

Dixon cancelled plans for an initial public offering last month, after testing listed investor appetite for the deal. 

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Private equity giant TPG offers cash for Fairfax Media crown jewels

TPG Capital is back with a new break-up plan for Fairfax Media.

TPG Capital is back with a new break-up plan for Fairfax Media. 

As revealed by Street Talk on Sunday, the private equity giant has made a cash offer to buy Fairfax's crown jewels - the Domain online real estate business - along with the company's three biggest mastheads, events and digital ventures (excluding online streaming network Stan).

Left behind would be Fairfax's New Zealand business, which had been seeking to merge with fellow publishing group NZME, Fairfax's Australian regional newspaper unit, its stake in the Macquarie Media radio venture and a 50 per cent share of Stan. 

Those assets would be retained by existing Fairfax shareholders under TPG's proposal. 

Domain plus the three mastheads - The Sydney Morning Herald, The Age and The Australian Financial Review - are expected to be worth about $2.5 billion.

The cash portion of TPG's bid is understood to be worth about 95¢ a share.

Sources told this column that TPG had made contact with Fairfax on Friday to discuss the plan. It is understood the Fairfax board convened over the weekend. 

Fairfax boss Greg Hywood confirmed the approach on Sunday night.

In an email to staff he said: "Appropriately, the Fairfax board is reviewing the indicative proposal. There is no certainty that the indicative proposal will result in an offer for Fairfax, what the terms of any offer would be, or whether there will be a recommendation by the Fairfax board."

It is believed TPG has outlined to Fairfax management that it wants to grow the mastheads to improve Domain's reach, and not cut them. Last week management announced a plan to cut $30 million in costs out of the metro publishing business, mainly through the loss of 125 journalist jobs at the SMH and The Age

TPG is advised by Credit Suisse and Gilbert + Tobin, while Macquarie Capital is in Fairfax's corner. 

It is understood TPG's interest reignited late last week after a tumultuous few days for Fairfax where its New Zealand merger was blocked, a significant number of staff were striking over the journalist job cuts and a trading update warned of falling revenue in the group's traditional assets.

Hywood told investors at a Macquarie conference on Thursday that Fairfax's second half revenue was tracking 6 per cent lower than last year, but Domain's revenue was up 10 per cent. 

Importantly, he said Fairfax was progressing plans to spin-off Domain and hoped to have a deal ready by the end of the calendar year. 

It is understood TPG made the approach to pre-empt the proposed Domain spin-off. 

Sources said concerns centred on the complexity of the structure TPG had presented; how the deal would (and whether it could) be implemented; and whether it was an incomplete solution for shareholders.

Deutsche Bank analyst Entcho Raykovski has an implied value on Domain of $2.2 billion. He reckons the rest of Fairfax Media's assets are worth about $710 million, with metropolitan print valued at $17.6 million.

Domain has been able to take advantage of the audience and reach of the SMH, The Age, and AFR. It is able to market through those newspapers and websites, and it has a significant amount of editorial content on those mastheads which drive traffic to Domain.com.au.

Raykovski estimates Domain's print revenues will be around $90.9 million this financial year, falling to $81.8 million next year. Digital revenues are expected to grow from $229.5 million this year to $268.6 million in 2017-18.

The German investment bank forecasts Domain's net profit after tax will come in at $42.4 million during the period, and expects that to almost double by the 2020 financial year to $82.2 million.

Fairfax shares rose to a five-week high of $1.0975 on news of its latest cost cutting plan, and ended the week at $1.06. 


 

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Morgan Stanley poaches RBC analyst Andrew Scott

Morgan Stanley has hired RBC's Andrew Scott as an executive director.

Morgan Stanley has hired RBC's Andrew Scott as an executive director in its research team to cover building materials, steel and contractors.

Street Talk understands employees at Morgan Stanley were informed of the appointment last week. Scott joins from RBC, where he spent two years after a stint at CIMB. He is expected to start at Morgan Stanley in August. 

Scott replaces James Rutledge, who covered the likes of Adelaide Brighton, CSR and Boral, and was poached by wealth giant Perpetual in March.

Employees were also told that Morgan Stanley had hired Niraj Shah as a vice president to cover packaging, chemicals and transport. He will join in June from UBS and previously worked at firms including Macquarie, CIMB and Shaw and Partners.

Scott and Shah worked together at CIMB.

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Clock ticks for Weightman's Cromwell Property Group

The pressure is mounting on Cromwell Property Group.

The pressure is mounting on Cromwell Property Group, led by Paul Weightman, to add credibility to its intentions as it pursues major corporate moves in both hemsipheres of the globe.

In Australia, interest is intensifying around the identity of Cromwell's debt and credit backers for its near $3 billion offer to privatise listed peer Investa Office Fund.

While some names are circulating - South Africa's Redefine Properties on the equity side alongside lenders including the Commonwealth Bank, NAB and France's Credit Agricole - more of the line-up must be revealed before investors can become confident the ambitious bid can be properly funded.   

And the clock is ticking for Weightman, with Investa due to release revaluations of its portfolio any day now. Those revaluations - based on a commercial property market that is still getting stronger - could potentially make Cromwell's already sweetened all-cash bid start to look a little cheapish. 

Meanwhile, investors will be carefully scrutinising whatever they can glean about Cromwell's plan to float a large portfolio of European office towers and industrial assets on the Singapore exchange.

Cromwell has not exactly thrilled investors with its results in Europe, two years after acquiring Valad Europe, an investment platform which then managed a $7.6 billion property portfolio across Europe, in a $208 million deal.

Since then Cromwell has disappointed with a hefty writedown of the European business, while key staff, including former chief executive and chairman Martyn McCarthy have left the business.

That disappointment raises the bar a little higher for Weightman back home in Australia as he prepares to commit his investors' and new backers' money into a much bigger takeover of the $4 billion listed Investa Office Fund.

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