Paul Little says the Macquarie Bank’s “ifs and buts” takeover proposal for Patrick Corp is a con job. Gee, I wonder what he really thinks. Things we couldn’t print without lots of asterisks, I suspect. And some of the expletives could be reserved for himself and his advisers.

The line that might well sum up both the cheek of the Macquarie Bank fee factory and the haphazard nature of the Toll bid is the allegation that Macquarie is seeking a $70 million break fee as part of its bid. That is, MacBank wants Patrick to pay it $70 million if the bid that it might make doesn’t succeed. According to Toll’s understanding of the planned bid, Macquarie is only ever thinking of putting up $165 million in capital anyway.

Toll didn’t score a break fee deal with Patrick when it thought it won this long battle. According to the SMH, Little said he had “not seen the need for one”. I suspect he does now.

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The Macquarie proposal, as outlined by Little and so far not denied in any substantial way, is indeed rich. Among the many opinions floating around is the possibility that this could be the high water mark for the infrastructure investment and fee frenzy. It has financial engineering and opportunism written all over it.

And the base line to the bid is that it’s one big pick’n’flick anyway – the promise of a quick profit for those shopping wholesale at the Macquarie deal emporium, as long as the stock market rally holds up for another year or so.

The immediate big test is whether Patrick’s chairman and CEO want to risk their own capital while feeding the Macquarie fee machine. Chris Corrigan has generally eschewed big fee investment bankers as he has built up Patrick – they haven’t been worth it. Now the proposal reportedly is for Corrigan and Scanlon to match Macquarie’s capital investment while not receiving anywhere near the payoff. They would have to dislike Paul Little a very great deal.

And then there’s the little matter of a bottom line. According to Goldman Sachs JB Were figures, Patrick is somewhat fully priced at the Toll takeover figures. Goldies’ transport analyst Paul Ryan is telling clients Toll’s current offer already reflects a strategic premium. Assuming $100 million in synergies, the acquisition is not earnings per share accretive for three years.

And to think that Chris Corrigan is so close to living the good life in Italy in semi-retirement. You’d have to dislike Paul Little quite a lot.

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Peter Fray
Peter Fray
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