Australia's Biggest IPO: QR National Float

Rail freight business, QR National, will be Australia's biggest Initial Public Offering (IPO) since the final Telstra (T3) sell off in 2006. The prospectus for the QR National float is scheduled to be released on October 10, with expectations of the company reaching the ASX top 50 by late November.

The coal haulage tracks and trains business of QR National is valued at $7 billion with investors being offered shares worth around $4 billion and $5 billion. QR National has 2300 kilometres of track, 700 locomotives and 16,000 wagons. The company operates in five states, is Australia's largest rail freight company and claims to be the largest coal hauler-to-port in the world. The record for an IPO in Australia is for Telstra, which raised $14.3 billion in 1997.

Queensland treasurer, Andrew Fraser launched the pre-registration process for retail investors, whereby they can apply via a website for a guaranteed allocation of shares. Mr Fraser has said that, "I think it is a very sound investment and I think there will be very strong investor demand for it." The allocation amount has not been disclosed. The prospectus will be promoted along a $15 million publicity campaign leading up to the November float. There are plans to have a "loyalty bonus" for shareholders retaining stock for a specified period of time. In an event of oversubscription, Queensland residents will be given priority.

There is also a large demand from the institutional community. Steve Wilson, the head of Wilson HTM, a co-lead manager for the listing has been quoted as saying that: "The demand from international investors is huge. We have had all these international investors ringing us wanting stock. Everyone knows about the growth of China and the BRIC (Brazil, Russia, India and China) economies."

The Queensland state government will retain 25 to 4- percent of QR National, but would look to divest its remaining holding in the future. "We are looking to place obviously at least 60 percent in this transaction and we will sell down into the future," Mr Fraser said. There has also been a law enacted for any holder to have a maximum 15 percent holding to protect the company from takeover threats.