Shares in the Millionaire Factory rocketed $1.25 to a high of $76.99 this morning before the risks of its debt-laden $10 billion management buyout of Alinta Ltd started to sink in. By midday the stock was 6c weaker for the day at $75.68 in a rising market.
Not content with risking more than $500 million of equity in the highly geared Qantas bid, Macquarie appears set to put another big whack on the line if the Alinta MBO proposal gets up.
Macquarie and its bitter rival Babcock & Brown are increasingly dominating Australia’s energy infrastructure assets but how the Millionaire Factory and its key directors handle the myriad of roles and conflicts is hard to comprehend?
For instance, Origin Energy was first spun out of Boral in 2000 by then managing director Tony Berg, who was previously the CEO of Macquarie Bank.
The Millionaire Factory has advised Origin on many deals since the demerger and is once again providing the advice after AGL Energy unveiled its desires for a $13 billion merger last week.
However, it should be remembered that Macquarie Bank’s main board executive director and co-founder Mark Johnson is the chairman of AGL Energy.
So, a Macquarie director is driving AGL’s assault on Origin which is being defended by Macquarie and then the bank itself comes along and says it want to buy Australia’s biggest pile of energy infrastructure assets. Knowing Macquarie’s history, this Alinta play will be another classic buy and flip operation but its balance sheet is already saddled with more assets from around the world than it wants so it wouldn’t want to suddenly cop a major equity market correction.
Macquarie has been Bob Browning’s main adviser as he has aggressively built Alinta over the past seven years, but bankrolling the biggest Australian MBO since John Elliott’s ill-fated tilt at Foster’s in 1989 is in another league altogether.
Another lovely irony in all this is that one of the independent Alinta directors who will assess this management buyout is Tina McMeckan. Tina’s husband Jim McMeckan is a former Macquarie investment banker who advised US utility Mission Energy on the acquisition of Victoria’s first privatised power station, the 1000mW Loy Yang B facility, in the early 1990s.