Macquarie Bank’s critics have eaten a big serving of humble pie today after the Millionaire Factory announced a spectacularly profitable sale of its stake in Rome Airport.

The core of the criticism advanced by former Lazard man Edward Chancellor and hedge fund manager James Chanos – and pushed hard by ABC Radio’s Stephen Long – was that Macquarie pays too much for infrastructure assets and then optimistically writes up the value to justify debt-funded distributions to investors.

Having paid €480 million for a 44.7% stake in Rome Airport back when the market was bottoming in March 2003, Macquarie Airports has today exited to Italian firm Leonardo for €1237 million in cash.

Leonardo is no associated Macquarie fund, it’s a bone fide third-party investor that was prepared to pay way above the conservative €660 million book value.

So, the facts in this situation are that Macquarie Airports wrote up Rome by 37.5% in four years, but then sold the asset for 88% more than the supposedly inflated book value, to crystalise a cool overall profit of €757 million, or $1.2 billion.

This is the ninth straight time Macquarie has profitably offloaded one of its 114 infrastructure assets. The other eight above-book-value exits have been Birmingham Airport, Sydney Roads, Cintra, South East Water, Yorkshire Link, Detroit Windsor Tunnel, Reef Networks and Michigan Eletric.

Swooping into the heart of the Roman empire and extracting a 10-figure plus profit on a trophy asset like Rome Airport is spectacularly successful and great for Australia no matter which way you look at it. Let’s hope ABC Radio gives Macquarie the credit it deserves.

Shares in Macquarie Airports today surged 12c to a record $4.32, giving investors who supported the original $2 float and the $1.57-a-share rights issue to fund the Rome acquisition a spectacular return.

Macquarie Bank advised on the deal and will no doubt extract a hefty multi-million dollar success fee – signed off by the independent directors, of course.

Shares in the bank rose 54c to $89.59 this morning, meaning the $87 share-purchase plan for retail investors is now clearly back in the money and likely to proceed after last week’s offer to ditch it.

Peter Fray

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