Doing an IPO in AustraliaMICHAEL HANSEL, PARTNER

What is an IPO?

The terms IPO, public offering, listing or floating are, by and large, interchangeableThese terms describe the process of transforming a privately owned company into a publicly-owned company whose shares or other securities can be traded on a recognised securities exchange

IPOs in 2012 – 2013 (up to 30 June)

The number– 140 for the financial year ending 30 June 2013 [99 in 2012 and 41 in

2013]

The ‘winners’ and the ‘losers’Comments on last year – Just 33 were above $US 20 million

Comments and expectation on 2013/2014– Optimistic– Pent-up interest– Potential transactions are in the pipeline

IPOs in 2012 – 2013 (up to 30 June) (cont)

Second quarter of 2013 market review– mixed results – three withdrawing applications, nine new floats, 40 percent drop

from the same quarter last year– Some substantive deals - proceeds totalled $2,608 million, the

second best quarter in the past five years

Improved IPO Landscape

Year Amount raised ($m) Floats Winners Losers Square

2012 1265 44 20 21 3

2011 1558 103 27 72 4

2010 7975 94 59 32 3

2009 2985 40 22 17 1

2008 2018 72 3 69 0

Star floats – 2012^ (gain percent)

Breaker Resources

Bora Bora Resources

Boadicea Resources

Equamineral Holdings

Pura Vida Energy

85.00%

125.00%

195.00%

225.00%

290.00%

Biggest raising (amount raised $ m)

Cuesta Coal

Armour Energy

Calibre Group

Fonterra Shareholders' Fund

Shopping Centres Australasia

24.1

75.0

75.0

414.0

472.0

The pros and cons of listing

Benefits– Access to a greater pool of capital – Improved financial condition– A (secondary) market for your organisation’s shares – Increased shareholder value– Improved valuation – Succession Planning– A path to mergers and acquisitions – Higher corporate profile– Alignment of employee interest/management interests– Institutional investment – Reassurance of customers and suppliers

The pros and cons of listing (cont)

Disadvantages– Loss of control– Dealing with shareholders' expectations– Restrictions on selling shares– Enhanced Disclosure– Limits on management's freedom to act– Initial and ongoing expenses– Continuous disclosure

Listing Requirements (ASX)

Min market capitalisation

1 Net Tangible Assets: Calculated as the total assets of a company, minus any intangible assets such as goodwill, patents, and trademarks, minus all liabilities and the par value of preferred stock. Also called net asset value and book value.2 Market Capitalisation is the value of the company expressed as the told number of shares on issue

multiplied by the issue price.

Profit or Asset Test

Profit Test

A$1million net profit over past 3 years + A$400,000 net profit over last 12 months

Asset Test$3 million Net Tangible Assets1; or

A$10 million market capitalisation2

Listing Requirements (ASX) (cont)

Min number of shareholding

1Number of shareholders required to hold a parcel of shares with a value of at least $2,000 2Free float (% of securities held by non – related parties of the company)

Number of Shareholders1 Free Float2

300 Not less than 50%

350 Not less than 25%

400 No minimum free float

Listing Requirements(ASX)(cont

Working capital requirements following listing– At least $1.5 million– Or if it is not, it would be at least $1.5 million if the entity’s budgeted

revenue for the first full financial year that ends after listing was included in the working capital

Listing Requirements(ASX)(cont)

Relevant escrow considerations– The ASX may restrict the transfer of shares known as “escrow”

issued before the listing so that they cannot be sold for a period of up to two years after listing

Listing Requirements (ASX)(cont)

What is a Prospectus? – A document issued by a company setting out the terms of its equity

issue– Must be lodged with both the Australian Securities and Investments

Commission (ASIC) and ASX

What information is required in a prospectus? – To help make an informed assessment of:

• the assets of and liabilities, financial position, profits and losses and prospects of the corporation;

• the rights attaching to the shares of the corporation; and• the merits of participating in the Company and the extent of the risks

involved in the participation.

Listing Requirements (ASX)(cont)

Recent ASIC approach– Focus on clear, concise and effective disclosure: plain language,

active voice, short sentences, avoid repetition, explain complex information, including technical terms

– Key information about the issuer and offer in a balanced way – More focus on key risks, specific rather than general risks and

balance of benefits and risks– Explaining business model- more disclosure about directors and key

managers

The Listing Process

Step 1Pre-IPO Preparation

• Appoint and consult with advisers: Underwriters, Brokers, Corporate advisers, • Accountants, Lawyers & Sponsor

Step 2Talk to Securities Exchange

• Preliminary stages – Security Exchange provides guidance on general IPO process

• Advanced stages – guidance on Listing Rules of the Security ExchangeStep 3 Prospectus preparation & due diligence

• Detailed review of Company carried out by: Company Management & Board, Advisers, Underwriters, Brokers & Sponsor

Step 4 Lodge Prospectus & apply to list

• Prospectus lodged with ASIC

• Listing application must be lodged with Securities Exchange within 7 days of Prospectus lodgement with ASIC

Step 5IPO Offer Period

• Average 6 to 8 weeks

• Up to 3 months under Corps ActStep 6Receive approval to list from Securities Exchange

• Securities Exchange Letter of Approval sent to Company

• Subject to conditions, including completion of capital raising

Step 7Admission & Trading

• Company satisfied all conditions set out in Securities Exchange approval letter & is admitted

• Official quotation to occur approximately 2 days after admission

ASX or APX?

ASX (Australian Securities Exchange)– A licensed operator of markets and clearing and settlement facilities

in Australia – Top 10 measured by market capitalisation

APX (Asia Pacific Stock Exchange)– APX is a securities exchange with a market licence granted by ASIC

, aiming to trade in Australian dollars & RMB– APX is in the process of developing a Chinese RMB board, will

assist:• APX listing companies to raise capital using Chinese RMB; and• Chinese investors to trade in RMB via online trading platform for APX

listed companies.

ASX or APX? (cont)

Why Sponsors are required by APX for its Listees? – A listee must include certain documents signed by an APX Sponsor– APX will liaise between the potential listee and the Sponsor

What Sponsors do?– During the first two years after IPO, the listee must engage a

sponsor to advise it in relation to its obligations under the APX Listing Rules

Criteria of ASX vs. APX

Criteria ASX APXSize requirements Net tangible assets at the time of admission of at least

A$3million or a market capitalisation post-IPO of at least A$10million

A market capitalisation of at least A$2m

Spread requirements (number of shareholders)

300 holders who each hold shares with a value of at least A$2000; or 400 shareholders and at least 25% of the company’s shares are held by unrelated entities

At least 50 holders who each hold shares with a value of at least AU$2000 and at least 25% of securities holders are unrelated

Information requirements Prospectus or information memorandum Prospectus or information memorandum

Working capital requirements at least $1.5million Min $300,000

Directors requirements to satisfy ASX that each director or proposed director is of good fame and character:

a. a Police/CrimTrac criminal history check(If not an Australian resident, equivalent criminal history and bankruptcy checks to be supplied for each country in which the director has resided over the past 10 years);

b. an Insolvency and Trustee Service Australia bankruptcy check; a statutory declaration;

c. not the subject of any criminal or civil proceedings;

d. Not the subject of any disciplinary action etc.

is of good fame and character;

must have the appropriate expertise and experience.APX: declaration and undertakings

Sponsor requirement None required Required to appoint a sponsor

Profit test Aggregated gross profit for the last 3 years no less than A$1million or the consolidated gross profit for the last 12 months must be more than A$400,000

Nil

Operating History 3 years 3 years financial statements with the last within 6 months; term can be shortened if credible case is put forward to APX.

Thank youMICHAEL HANSEL, PARTNERPhone +61 7 3024 0328Email m.hansel@hopgoodganim.com.au www.hopgoodganim.com.au