Business

Deals of the year: Kiwis make hay with mega deals in 2021

In a world swimming with capital New Zealand produced a record year for mergers and acquisitions – and the outlook is for more of the same next year. The Business Herald looks at some of the biggest deals of 2021, many of which snuck out from under the radar.

Mark Stewart lands the big one with Ziwi

Mark Stewart’s reputation as a canny investor went up another notch in September when local food maker Ziwi was sold overseas for as much as $1.5 billion.

Stewart, known for investing successfully in health and property-related businesses, built up a 72.44 per cent stake in Ziwi – meaning this deal alone has catapulted him into the billionaire club.

Not bad considering Stewart first invested in Ziwi back in 2012, injecting about $10 million to support the company’s global expansion.

Chinese investment fund FountainVest was the successful bidder after PwC was appointed in August, beating a bunch of heavy hitters including dairy giants Nestle and Yili Group, and private equity firms KKR, Pacific Equity Partners and Carlyle Group.

Founded in 2002 by Tauranga-based Peter Mitchell, Ziwi’s upmarket, air-dried dog and cat food typically sells for more than $50 a kilo under its Ziwi Peak brand.

Stewart is a former Ebos director and has made big money out of Abano, Vertex (when it was sold to Alto Plastics) and other investments.

$1.45 billion payday for Seequent investors

Much to the chagrin of those who would have liked ownership of Seequent to remain in New Zealand, the high-tech company was sold to America’s Bentley Systems for US$1.05b($1.45b) early in the year.

Silicon Valley private equity firm Accel-KKR and New Zealand’s Pencarrow agreed to sell their stakes in the Christchurch-based geoscience software company to the Nasdaq-listed Bentley.

Bentley, an infrastructure engineering software company, said the acquisition would add about 10 per cent to its revenue and earnings before interest, tax, depreciation and amortisation, and that it was expected to be “measurably accretive” for its organic growth rate.

Pencarrow managing partner Nigel Bingham would not be drawn on the return made on the investment, other than to say: “It’s been very, very successful”. “It’s one of the best businesses in New Zealand that no one has ever heard of,” he said.

Bingham said the reason for Seequent’s relative obscurity was that 99 per cent of its business was overseas.

Seequent’s Graham Grant told the Herald that a sharemarket listing had been considered but the logic of being part of a far larger organisation like Bentley was “too compelling”.
Seequent’s technology helps clients understand what happens beneath the earth’s surface.

Peter Jackson's $2.3b Weta deal

Film-maker Sir Peter Jackson skyrocketed back into billionaire territory when he agreed to sell Weta Digital’s tech division to US-based Unity software in a deal worth nearly $2.3b in cash and shares – not bad going for a business that was assessed as being worth $400m only two years earlier.

The deal also pocketed Napster founder and Weta investor Sean Parker a neat $600m windfall off the back of his more than $100m+ investment in 2019.

The US-based game developer will hereby take control of 275 staff as well as technology that enabled the special effects seen in the Lord of the Rings, Avatar, King Kong and the Jungle Book.

Unity’s plan is now to democratise these tools through a subscription-based service that will give developers around the world access to the technology.

The company believes that this “could unlock the full potential of the metaverse” – a reference to the digital world that Mark Zuckerberg leaned into heavily during his announcement that Facebook would be rebranding to Meta.

This should make the future of the company equal parts fascinating and terrifying.

Peter Hutson has the last laugh

Having been twice jilted in attempts to take over Dental firm Abano Healthcare, Peter Hutson had the last laugh this year with the sale of Australian hearing care retailer Bay Audio for A$550m ($584m).

The company, which has around 100 retail outlets in shopping malls in Australia, was founded in 2007 and initially run as a joint venture between Hutson and his wife Anya,and Abano.

In 2009 the New Zealand arm of the business, Bay Audiology, was sold to focus on expansion in Australia. The New Zealand business was later sold in 2010 for $157.8m.

In 2016 the Hutsons exercised their pre-emptive right to buy Abano’s shareholding in the remaining business. This saw the Hutsons pay $32m for the 50 per cent of Bay Audio shares they did not already own. Bay Audio was also part-owned by New Zealand investor James Reeves.

Hutson and Reeves tried twice to take over Abano in what became an extremely hostile affair and the Abano board knocked back unsolicited offers – one of which was $10 a share for 50 per cent of the company.

Abano was eventually taken over by Australia-based private equity firm BGH Capital and the Ontario Teachers’ Pension Plan Board for $5.70 per share, valuing the company at $149.8m, through a scheme of arrangement.

Vend sells to Lightspeed for $455m

Auckland-based Vend – a maker of cloud-based software that allows cash registers to be replaced by iPads – sold to the Montreal-based, NYSE-listed Lightspeed for US$350m ($455m) in March.

Bell Gully partners Dean Oppenhuis and James Gibson advised on the deal.

The privately-held Vend, which has some 25,000 retailers worldwide using its point-of-sale software, was valued at US$100m with its last major capital raise in2016 – indicating the Lightspeed sale involved a minimum 3.5 times gain for investors.

The largest shareholder was Wellington-based venture capital firm Movac with a 9 per cent stake.

Founder Vaughan Fergusson, his ex-wife Mel Rowsell and early backer Sam Morgan were the next largest shareholders, each with an 8 per cent share (the sale represented Morgan’s third major score after the Trade Me sale and his huge gains via his early Xero stake).

Milford Asset Management had a 5 per cent stake via its Active Growth Fund – a Kiwisaver vehicle.

And the sale also represents major gains for two smaller earlier investors: Peter Thiel’s Valar Ventures and Lance Wiggs’ Punakaiki Fund.

Lightspeed, which is also in the point-of-sale software game, as well as other areas of e-commerce, has left Vend’s Auckland HQ intact.

KKR's majority stake values Education Perfect at $445m

June saw US private equity giant Kohlberg Kravis Roberts takea majority stake in Dunedin-based Education Perfect in a deal that values the online learning firm at $435m – or up to $455m if the company hits earn-out goals over the next two years.

Dunedin brothers Craig and Shane Smith founded the company 2008 when they were still at Otago University and looking for an online aid to help them study. Finding nothing, they created Education Perfect, which today offers online lessons for students and software tools for teachers worldwide. The pair retained a minority after the KKR deal.

The KKR valuation represented a 9x gain over Education Perfect’s last major deal.

In 2017, Australian venture capital firm Five V Capital and Malaysian group Mulpha Credit (which is selling out under the KKR deal) bought a minority stake in what the Herald understands was a deal valuing Education Perfect at $50m.

CEO Alex Burke said Education Perfect’s core of around 200 staff would continue to be based in New Zealand. And while now a global player, the company continues to expand its local modules. The latest is its te ao Māori programme of courses, which are aimed at both classrooms and corporate staff who want to move beyond beginner te reo. The courses have Māori culture and history modules as well as language units.

Ninja Kiwi sells to Swedes for $203m

April saw Sweden’s Nasdaq-listed Modern Times Group (MTG) buy New Zealand game developer Ninja Kiwi for 1.2 billion kronor ($203 million). Earnouts could ultimately take the value of the deal as high as $273m.

Ninja Kiwi was formed by Kumeu brothers Chris and Stephen Harris in 2006. Each held a 50 per cent share ahead of the MTG deal.

The pair focused on games for mobile phones, which are relatively cheap and easy to develop next to PC or console games, with access to a global audience through Apple and Google’s app stores.

They quickly had a global hit with a game called Bloons ($8.99), which was first released in 2009 and has been a constant top-seller ever since, in various versions. At the time of the sale, Bloons Tower Defense 6 was number one on the Apple iOS App Store’s action games chart in the US – and Apple Bloons TD 6 was number 2 on its Top 10 of paid games for iPhone for NZ for 2021.

An MTG market filing revealed it had paid 4x revenue, but for a highly profitable business. Kiwi Ninja had total turnover of $56m in 2020 with adjusted ebitda of $28m.

The Harris brothers said they would keep running Ninja Kiwi from Kumeu.

By the time of the sale, they had 70 staff across Auckland and Dundee (where they bought Scottish developer Digital Goldfish, with around 15 staff, in 2012).

Mercury buys Tilt NZ for $797m

Mercury bought Tilt Renewables’ New Zealand operations for $797m, making it one of the country’s bigger wind power generators.

Under a deal signed in March between Mercury, Powering Australian Renewables (PowAR) and Tilt Renewables, Mercury ended up with the New Zealand wind power assets while PowAr took up the Aussie assets.

The final offer for Tilt’s operations valued the business all up at $3.07b.
Mercury is now the proud owner of operating wind farms Tararua 1, 2 and 3, along with Mahinerangi and Waipipi.

It also has wind power development options in the Manawatū, Northland, Otago and Southland.

The deal was funded from the sale of Mercury’s 19.9 per cent stake in Tilt, worth $608m, and net debt of $189m.

Mercury sees wind power as being a natural fit with its portfolio of renewable, geothermal and hydro generation.

The company says its hydro system on the Waikato River can be managed to respond well to compensate for fluctuations in wind output, and while wind generation may be variable hour to hour, on average it provides a reliable source of energy to support hydro storage.

PowAR is a partnership between AGL Energy, Queensland government-owned investment group QIC and the federal government’s Future Fund.

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