Macquarie Manages To Off Load Satellite Fund

Post by Sharat on April 1, 2009 · Under Company News, Equities, banking, news · Comment 

Domestic Investment banking major Macquarie Group, got a boost from a long time shareholder Canadian Pension Plan. The pension plan is buying Macquarie unit and satellite fund Macquarie Communications for $7.3 billion including debt.

News of the divestment sent Macquarie’s stock price rocketing during Tuesday’s trading session, ending the day up 11.7 per cent.

Macquarie investors were pleased because it allows the investment banking group to jettison one of its most highly leveraged funds, clearing its balance sheet, enabling it to use its balance sheet to focus other activities.

The news of the deal sent the prices of other Macquarie satellites moving sharply upwards. Macquarie Infrastructure Group rose 13 per cent to $1.55 a share and Macquarie Airports Group gaining 9.4 per cent to $1.87.

The deal was announced on Tuesday after Macquarie had revealed the details of a new compensation plan for its top executives, designed to align the long term interests of shareholders and executives more closely. Executives will now receive a smaller proportion of their income as cash and a large proportion through stock which will be retained by the bank.

The deal had clearly already been priced into the stock of Macquarie Communications for the last month. Over the last year Communications stock price has risen by 76 per cent, outperforming the broader market significantly. The pension fund has also agreed to pay Macquarie $56.5 million to acquire the management rights plus another $40 million over the next decade as royalties for intellectual property.

The deal signals the formal end of the so-called Macquarie model in which it over paid for assets, sold them to a listed vehicle, leveraged the assets to the hilt, paid for interest by revaluing the assets and earned management fees along the way.

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