After seven years of management by the Macquarie Group and more than half a billion dollars in base and performance fees, Sydney-listed Macquarie Airports (MAp) is to internalise its management in an effort to attract investors wary of externally-managed funds.
In an announcement to the Australian Securities Exchange in Sydney this morning, MAp said that after examining a range of options to address the disparity between its share price and the value of its airport holdings, the internalisation of management was deemed the best option to grow value for its investors.
Currently, the firm oursources its management to Australian investment bank Macquarie Group, an arrangement commonly known as external fund management.
In a presentation to investors on the proposal, MAp claimed the new structure will give it the ability to attract investors who are currently “unable or unwilling” to invest in externally managed funds, in addition to foreign investors concerned by MAp’s proximity to its foreign ownership cap.
Another factor cited by MAp is the removal of the need to pay base management and performance fees to Macquarie, of which it has incurred A$547 million (€314 million; $447 million) since listing in 2002. After Macquarie Group’s management rights are terminated, MAp estimates it will save A$43 million per year in base management fees, based on last year’s levels.
Macquarie Group is to receive 150 million new MAp securities at A$2.30 each, valuing the consideration at A$345 million, as part of the transaction. That would increase its principal holding in MAp from 21.0 percent to 27.3 percent, according to a press release from Moody's Investors Service.
MAp’s management team, including CEO Kerrie Mather, have been offered employment with MAp. Mather said in a statement MAp’s management team remains enthusiastic about the business and that the company is in a sound financial position as a result of its actions over the last few years.
Macquarie is to provide support services to MAp for a further year in order to help facilitate it becoming a standalone entity. MAp said it still intends to pay a distribution of A$0.21 per share for 2009. MAp’s shareholders will be asked to approve the transaction at a general meeting in September.
Earlier in the week MAp, and its parent Macquarie Group, halted the trading of their shares in advance of making a significant announcement which could impact their share prices.
Last month MAp completed a refinancing of Sydney Airport, contributing A$711 million of cash to reduce the asset’s debt level, and increasing MAp’s holding in the airport to 74 percent in the process. In May it agreed to sell its 20 percent stake in Japan Airport Terminal to JAT.
In June another listed Macquarie fund, Macquarie Communications Infrastructure Group, cut ties with Macquarie Group by accepting the Canada Pension Plan Investment Board’s offer to acquire it for A$1.64 billion.
Other Macquarie-managed funds have similar initiatives under way, including major asset sales, debt refinancings, share buybacks and fund privatisations that are “likely to result in a return of capital” from them to shareholders, Macquarie has previously said.