At last the Queensland government got the float of QR National away successfully at $2.55 a share, lower than hoped for, but the sale has happened.
Bloomberg pointed out that while QR National was coming to market, two smaller IPOs were pulled globally, including the $773 million issue planned by Karoon Gas of its interests in Brazil
.
Karoon and Harrahs, the American casino group (which pulled a half a billion dollar issue last week) both cited difficult market conditions last week in the wake of the re-emergence of fears about Europe and China.
But the rough market conditions didn’t stop the huge GM float from happening in the US, or the QR National issue.
The common link was the presence of governments as sellers (The US and Canadian Governments were the big sellers in the GM sale).
QR National was simply too large and of such great importance to the Queensland Government, that the float was kept on track until more than $4 billion had been raised.
The issue had to be done; otherwise the Bligh Government would have had major problems in Queensland.
This determination to get the issue across the line raises more questions about the pricing and whether the shares will be pressured lower once the post float support mechanism is over.
The choppy market conditions last week look to have made certain the $2.55 final price would be at the lower end of the pre-float forecast of $2.50 to $3.00.
The price was always under pressure as analysts slated it for being expensive at around 21 times earnings.
It received moderate support from retail investors, and was heavily supported by institutions, both local and foreign.
The share offer allocated 34% of shares to 80,000 retail investors and 66% for institutional investors.
So QR National will float at $2.55 a share today, generating $4.6 billion for the Queensland government.
The stock will be listed around noon.
The state government’s forecast range was between $2.50 and $3.00 a share.
The float of the railway operator will be the largest share market listing since Telstra was privatised in three stages from 1997.
The state government will keep 40% stake of the company worth $2.1 billion.
Retail (small) investors will pay $2.45 for a slice in the company because of a 10-cent a share discount and they will be eligible for loyalty bonuses.
The company will be valued at $6.7 billion and will be more than 70 per cent owned by Australians, including the state government’s stake.
QR National will have a $6.22 billion market value at listing. That compares to Qantas with a current market value of just over $6 billion.
According to the prospectus, QR National expects earnings to surge 75% over the next two years as coal shipments rise and mining companies expand projects in Western Australia.
Earnings before interest, tax, depreciation and amortization are set to increase 42% to $894 million in the year to June next year.
