When the stock market closed at a record high last night, it looked
like Macquarie Bank had just ripped a net $660 million in value out of
Melbourne-based Orica.

How so? Well, Macquarie Bank’s $2.3 billion acquisition of Dyno Nobel
Holdings was announced on Monday afternoon and the deal included the
on-sale of the non-US and Australian operations to Orica for $900
million. The market’s reaction was to send Orica shares down 55c or
2.6% to $20.35, a $200 million drop in market capitalisation to $5.5

In stark contrast, Macquarie Bank shares rocketed 2.6% to a record
$68.69, a move which lifted its market capitalisation by $460 million
to $15.88 billion. That’s a net change of $660 million in the relative
valuations of the two companies, although Orica has bounced 30c to
$20.65 today although Macquarie Bank has risen a further 6c to $68.75
in a falling market.

Terry McCrann got it absolutely right in Tuesday’s
Herald Sun when he pointed out, before seeing any share price reaction, that Macquarie Bank had won this
negotiation and Orica was paying too much.

Poor old Orica might claim it has loads of synergies to extract but it
simply joins a long list of corporates who have been massively
out-smarted by the sharp suits from Martin Place in Sydney.

Strangely, many of the victims are in Melbourne. Jeff Kennett will
never be able to live down the goldmine he delivered to Macquarie
through the Transurban tollroad, nor will former Foster’s CEO Ted
Kunkel who took the advice of Macquarie in selling his pubs and pokies
division ALH in a move which ended up making more than $100 million for
the Millionaire’s Factory but left Foster’s shareholders more than $600
million out of pocket when you consider the price that Woolworths paid
only a few months later.

That said, the Dyno Nobel deal is also great for Australian because the
Australian and US business will shift its headquarters from Oslo to
Sydney, float on the ASX and compete vigorously with Orica, which will
extend its lead as the world’s biggest explosives company with a 25 per
cent global market share.

It’s often a case of client and counter-party beware when dealing with
Macquarie, but you’ve got to admire the value they’ve created for

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Peter Fray
Peter Fray
Editor-in-chief of Crikey
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