News & Analysis

Babcock & Brown Capital severs ties with Babcock for A$5m

The firm’s board had originally agreed to give Babcock A$50m in exchange for terminating the management and advisory agreements, but a 'material reduction' in net assets forced them to reconsider the fee size. Management said the external management model had 'failed so far to deliver value to shareholders'.

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Shareholders of Babcock & Brown Capital (BBC) have voted to terminate their management with fallen investment bank Babcock & Brown in exchange for an A$5m (€2.7m; $3.6m) payment.

The measure was strongly backed by BBC management, who said in an investor presentation the outsourced management model has “failed so far to deliver value to shareholders”.

The vote makes BBC at least the fourth former listed investment company managed by Babcock to formally sever its ties with it.

In late March, London Stock Exchange-listed social infrastructure fund Babcock & Brown Public Partnerships reached an agreement to internalise its management agreement. Babcock & Brown Wind Partners completed its separation from Babcock in December, and Babcock & Brown Communities has been acquired by property developer Lend Lease and rebranded as Lend Lease Primelife Group.

It is also the first to do so at a significantly discounted sum. On 10 November, BBC announced that it had reached agreement with Babcock to terminate the management and advisory agreement for total consideration of A$50 million, but shareholders approved a payment of just one-tenth of that.

BBC’s board changed its mind on the fee due to a “material reduction” in the firm’s net assets, according to a statement. The $5 million fee will simply reimburse Babcock for costs incurred as manager.

Babcock has externally managed the firm since it listed it on the Sydney Stock Exchange in February 2005, raising A$1 billion – then the biggest Australian IPO so far that year.  BBC’s market cap today stands at about a fifth of that.

BBC shareholders also overwhelmingly voted to change BBC’s name. The firm will soon be known as Eircom Holdings Limited, with new ticker ERC, a reflection of its main asset – Irish telecommunications company Eircom.

Other post-Babcock name changes include “International Public Partnerships Limited’ (formerly Babcock & Brown Public Partnerships), “Alternative Investment Trust” (Everest Babcock & Brown Alternative Investment Trust) and “Everest Financial Group Limited” (formerly Everest Babcock & Brown Limited).