Magan’s latest project

Babcock & Brown, the Australian investment and advisory firm, has launched a co-investment vehicle with one of London’s most formidable corporate financiers at the helm. By Andy Thomson.

When George Magan puts his money where his mouth is, the City of London sits up and takes notice. Magan, after all, is one of the very biggest of the UK corporate finance world’s big-hitters. During his time at Hambro Magan & Co, the investment banking boutique he founded, and then at NatWest Markets Corporate Finance (which bought HM & Co in 1996), Magan advised on such seminal transactions as Swiss Bank Corporation’s acquisition of SG Warburg; Ford Motor Co’s purchase of Jaguar; and Deutsche Bank’s swoop for Morgan Grenfell.

Therefore, people should be taking note of Magan’s latest project: Babcock & Brown Global Partners (BBGP), a €340 million ($410 million) co-investment fund. The fund will invest exclusively in deals originated and structured around the world by Babcock & Brown, the Sydney, Australia-headquartered investment and advisory firm. It will have the right to participate in equity opportunities that Babcock & Brown is seeking to syndicate to third parties, for a minimum of 25% of the syndicated amount.  

Magan not only helped enlist commitments to the fund – mainly from European high net worth individuals – he has also agreed to become non-executive chairman of the BBGP investment committee.

So why the Magan vote of confidence? Babcock & Brown, which has committed €41.5 million of its own money to BBGP, started life in 1977 as a leasing and advisory business with a particular specialisation in infrastructure. As such, it introduced the buyout of UK rolling stock leasing firm Angel Trains to Nomura Principal Finance Group in 1996. “We had the idea but not the capital,” says Edward Hanson, Babcock & Brown’s head of equity marketing in Europe. Angel Trains went on to be the most successful of all Nomura PFG’s deals, delivering a reputed $675 million profit within two years.

Although Babcock & Brown took a chunky fee from the deal, that was arguably scant reward for having spotted the opportunity. Since then, it has made principal investments targeting asset-rich businesses its core activity. Headed by managing director Phil Green out of Sydney, Hanson says its revenue growth is much faster than any other part of the business. On its website, Babcock & Brown claims that between January 1 2000 and December 31 2003, it delivered average pre-tax IRR on investors’ capital of more than 30 percent.

In launching BBGP, Babcock & Brown was, in Hanson’s words, targeting people who “could bring something to the table”. Although Babcock & Brown will source the majority of deals in which BBGP invests, a statement announcing the fund’s final closing said investors “would have the ability to generate transactions and work proactively alongside Babcock & Brown.” Given his track record, it would be no surprise to find Magan more proactive than most.