There was plenty of discussion about conflicts of interest in today’s papers about the mooted $10 billion-plus (including debt) Macquarie Bank-driven management buyout of Australia’s biggest energy infrastructure company Alinta.
Chairman John Poynton has already surrendered his $400,000 a year gig as chairman and some investors believe he should leave the board altogether. That’s a fair argument, and if the deal doesn’t get up he certainly shouldn’t return.
Former Woodside CEO John Akehurst is arguably a more experienced energy sector chairman anyway and has plenty of experience in the argy bargy of conflicts of interests and control premiums from his time fending off Shell’s attempt to seize control of Woodside in 2001.
Akehurst has set up a transparent process in attempting to auction off the company, but it’s hard to see how the gang of five could possibly take a substantial equity position in a $10 billion play when they wouldn’t collectively be worth even $50 million.
What is effectively being auctioned here is the amount of discounted equity and incentives that will be offered by Macquarie, or any rival bidder, to back their bid and lend their corporate knowledge.
That does present a major conflict and you can only laugh at this line in The AFR this morning:
However, sources close to the transaction said the information being used by Macquarie Bank in its work for Alinta consisted solely of public documents.
That said, Alinta’s decision to hire the master of energy asset sales, John Wylie, should ensure a decent data room is established with equal access for all comers.
The most interesting conflicts in this deal involves Macquarie Bank as it goes from adviser to buyer, not unlike the way it advised Foster’s to flog its pub and pokies division to itself and creamed off a $100 million-plus profit in quick time.
Whilst Macquarie’s Rob Dunlop has advised Alinta on most of its recent deals, where does someone like John Roberts sit in all of this? Roberts is Macquarie’s representative on the board of Duet Group, Australia’s second biggest owner of energy infrastructure assets after Alinta. Duet is managed by a 50-50 joint venture between Macquarie and AMP and the bank still owns a direct 7% stake.
However, Roberts is also global head of Macquarie Bank’s investment banking group fund business and joint head of corporate finance. How could he not be involved in assessing any Alinta buyout, yet he’s a director of its biggest rival.