Latest News

2012: Deal-making goes small, commodities falter and cash-strapped companies call time

The nation’s resources and agricultural sectors remain a focus for consolidation despite concerns that the commodities super-cycle is at an end. In addition, a number of private equity groups and entrepreneurs are taking advantage of the volatile share market and difficult business outlook to make plays for acquisitions. On this basis, we have seen a re-emergence of deal-making, albeit concentrated at the smaller end of the spectrum, in industries such as retail, industrial services and infrastructure.

Hintons has enjoyed an active 2012, remaining strong in our core business of M&A communications. Hintons advised, among others, Glencore International on its bid for Viterra; DuluxGroup on its offer for Alesco; Spotless on its defence against Pacific Equity Partners; Biota on its merger with Nabi Biopharmaceuticals; Arrium on its defence against Steelmakers Australia consortium; Country Road with its acquisition of the Witchery Group and Ridley Group on the sale of Cheetham Salt to CK Life Sciences.

But as we reflect more broadly on the events of the past year, the dominant theme – and without doubt the most important one for Australia – is the flattening of global demand for commodities.

Significant falls in prices for the nation’s key iron ore and coal exports have prompted fears that the commodities super-cycle has reached an end. The bearish view is that China’s frenzied and prolonged phase of construction is giving way to a slower and more sustainable pace of growth, while the United States, Europe and Japan continue to grapple with the ongoing fall-out from the global financial crisis.

Certainly, the big resources houses are reviewing their investment plans as the prospect of a rapid rebound in commodity prices looks increasingly slim and this cost-cutting drive has had inevitable knock-on effects for the mining services companies that depend on them.

However, we believe that the long-term view is rather more sanguine than the doomsayers suggest. The Reserve Bank of Australia argues that Chinese construction will not peak in absolute terms for another five years owing to the 20 million or so rural migrants who flood into cities annually. The RBA predicts that China’s growth will become more steel-intense, rather than less, as housing becomes more high-rise and urbanised. China is also projected to add approximately 125 million cars over the next five years, requiring steel not only for their manufacture but also the construction of garages and multi-storey parking blocks. It’s a similar story with soft commodities. The shift towards an animal-protein diet in Asia and the growing global population has created burgeoning demand for grain as stockfeed, heralding enormous opportunities for primary production in Australia and elsewhere.

Exploring these opportunities, Hintons together with economic consultants Port Jackson Partners continued a fruitful collaboration with ANZ Corporate Communications with the production of a report entitled Greener Pastures: The Global Soft Commodity Opportunity for Australia and New Zealand. Greener Pastures quantifies the size and opportunity open to the local agriculture industry on both sides of the Tasman as a result of the shift in economic growth to Asia and the increase in demand for protein driven by the growing middle class. It is the third report in the ANZ Insight Series, following Earth, Fire, Wind and Water, a landmark report that outlined the benefits of the commodities boom for the Australian economy, and Quality Matters: A Progress Report on Australia’s Natural Resources Opportunity.

The ANZ Insight Series, which has met with a very enthusiastic response since its commencement in 2011, reflects the breadth of Hintons’ capability which includes the provision of high-level public affairs support.

Outside the commodities space, the retail and manufacturing industries came under pressure from the double challenge of a strong local currency and volatile demand. Companies in sectors as diverse as building construction, forestry and education also proved vulnerable to the uncertain economic outlook and tougher business conditions. Hintons provided communications advice and management to PPB Advisory in respect of the voluntary administration of Hastie Group and the receivership of APV Automotive Components and Aegis Correctional Partnership.

Nonetheless, scores of Australian companies in niche markets continue to make good progress. Corporates with a leading position based on a well-defined product offering – whether in healthcare, food and beverages, gaming or otherwise – remain well-capitalised and, as ever, interested in growth. For this reason, we anticipate a healthy flow of transactions when confidence eventually returns.

Hintons 2012

Glencore International

Australian communications support for Glencore International’s bid for Viterra.

 Biota

Communications support for Biota’s merger with Nabi Biopharmaceuticals.

 DuluxGroup

Communications advisor for DuluxGroup’s offer for Alesco.

Spotless

Strategic advisor for Spotless defence from private equity group Pacific Equity Partners.

 Country Road

Communications advisor on acquisition of Witchery Group.

 Arrium

Strategic communications advice relating to name change from OneSteel.

Strategic communications support relating to unsolicited takeover bid from Steelmakers Australia consortium.

 PPB Advisory – Voluntary Administrator, Hastie Group

Communications advice and management regarding the voluntary administration of Hastie Group.

 PPB Advisory – Receiver and Manager, APV Automotive Components

Communications advice and management regarding the receivership of APV Automotive Components.

 PPB Advisory – Receiver and Manager, Aegis Correctional Partnership

Communications advice and management regarding the receivership of Aegis Correctional Partnership.

 CSL Limited

Strategic communications, issues management and media liaison.

 Qantas

Strategic communications advice.

 ANZ

Strategic public policy positioning.

 Ridley Group

Advised on the sale of Cheetham Salt to CK Life Sciences.

 Citic Pacific Mining

Communications support.