The chorus has been overwhelmingly in favour
of Macquarie Infrastructure Group’s plan to spin off its mature Australian toll
roads business as Son-of-MIG. Stephen Barholomeusz’sSmage column this morning sums up the positives nicely.

But it also looks like the Fee Factory just
can’t resist the chance to take one long last suck on the $2.1 billion baby’s
lollipop – a slurp that pointedly challenges the usual MacBank claim that the
high fees it charges its captive funds are merely “market rate”.

MIG is going through the motions of a
four-month study to consider the best way of unloading the roads, but the market sees it as
pretty much a foregone conclusion that it will simply be a matter of setting up
another in-house fund by an in specie distribution to the existing MIG owners.
That avoids having to pay capital gains tax.

The Son-of-MIG’s main claim to fame is that
it will have a low fee structure, as befitting a mature cash cow. MacBank’s
high fees have been a source of growing contention with investors. A recent
Alan Kohler column suggesting investors would rebel and sack Macquarie as manager was enough
to hit the bank’s share price.

But there’s a certain irony in Macquarie moving to reduce this
little pocket of fees while charging a very hefty fee to do so.

It’s been suggested Macquarie will charge something
like $22 million to do the deal. For a simple in specie distribution to MIG’s
existing owners, that is outrageously rich.

If the Fee Factory is genuinely looking to
improve its gouge reputation, it could start by putting the deal out to tender
to check just what “market rates” might be. I’m happy to start the bidding at
one tenth of the suggested MacBank price – $2.2 million. How can responsible
“independent” MIG management refuse?

Peter Fray

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