27 May 2014 – The possible $1.1 billion takeover of standards publisher and certifier SAI Global by private equity investment fund Pacific Equity Partners flagged over recent days has raised fears that the supply of Australian and New Zealand standards and international standards could be compromised through ownership by a company focused on delivering high returns in an unlisted environment.
An ASX announcement from SAIG on Monday said chief executive Stephen Porges had been replaced with non-executive independent chairman Andrew Dutton. The company also said it had received an unsolicited, indicative, conditional and non-binding proposal from PEP to acquire 100 per cent of the outstanding shares in the company through a recommended scheme of arrangement for an indicative price in the range of $5.10 to $5.25.
“At this stage, the board has not formed a view as to the merits of the Indicative Proposal,” an SAIG company statement said.
“The board is open to engaging with PEP to determine whether a binding proposal that is capable of being put to shareholders with the recommendation of the SAI Board can be developed. The board has appointed Macquarie Capital and Gilbert + Tobin to assist in this process.
“The board cautions that the Indicative Proposal is non-binding, conditional and subject to due diligence. There is no guarantee that a proposal capable of being put to shareholders will eventuate.”
There could also be competition for the company, now in play. Analyst Moelis indicated that the offer from PEP was not especially general and flagged competing offers could emerge.
What SAIG does
SAIG has been the publisher of all AS/NZ standards developed by Standards Australia, including draft standards, since 2003, when SA sold the publishing arm of the company to SAIG, which was then floated on the Australian Stock Exchange.
Standards are referenced in most leading sustainable rating tools and ISO 14001 is the international standard for environmental management systems.
There are also many standards that must be used by law for a wide range of consumer products and for other enterprises such as infrastructure, electrical systems, health and safety standards and for environmental standards.
Each draft standard is available free of charge for industry feedback but final standards range in price from $20 to much higher costs.
A concern is that a change of ownership to a private equity investment company that may be driven by strong profit motives may drive up the cost of standards or that publication of the more arcane and specialised standards will be abandoned.
Business as usual for Standards Australia
Media reports that Standards Australia was a “subsidiary” of SAIG were denied by a company spokesman.
“Standards Australia is an independent not-for-profit company limited by guarantee and not a subsidiary of SAI Global Limited,” the spokesman told The Fifth Estate on Tuesday. He also said that the standards body had not been party to any discussions between PEP and SAIG, and at this stage there had also been no communication directly with PEP.
So, what if anything would change for users of Standards?
The Fifth Estate has requested details from PEP of any changes it may make to the availability of standards documents should its bid for SAIG be successful. A response was not received by time of publication.
According to the Australian Private Equity and Venture Capital Association, PEP is a large and active private investment fund that seeks to acquire control positions in firms with enterprise values between $200 million and $1 billion in stable industries. The fund’s focus is on delivering high returns in an unlisted environment, and this is reflected in some of the recent acquisitions – and privatisation – of companies such as credit reporting and commercial intelligence company Veda, and facility manager and caterer Spotless.
Other PEP acquisitions remain publicly listed, such as Energy Developments Ltd, in which PEP acquired a controlling interest in January 2010 for $844 million. EDL is focused on providing low cost renewable and low carbon electricity operations in Europe, the US and Australia and has a total generation capacity of over 600 megawatts.
Power generation projects include landfill gas operations at 60 sites in five countries, waste coal mine gas abatement (for electricity generation) projects in Australia including Tower Appin, 107 MW of remote energy generation projects at five sites in Australia using liquefied natural gas for electricity generation, in addition to gas production projects for LNG supply and compressed natural gas supply.
Other major acquisitions by PEP have included SCA Hygiene Australia (2012), Peters Icecream (2012), American Stock Transfer and Trust company (2008), Hoyts Group (2007), Griffins Foods (2006), Xtralis (Vesda smoke detection and Adpro video security) (2006) and Link Market Services (share market registry and superannuation administration) (2005).