Millionaires Factory AGM caravan comes to Melbourne
February 2, 2010
Dear Mayne Reporters,
greetings from the RACV library in Melbourne's Bourke St as we get ready to head down to the Macquarie Group AGM which started 10 minutes ago at Melbourne's Crown Casino.
Given that Macquarie negotiated PBL's $1.8 billion purchase of Crown 10 years ago and the way the Millionaire Factory has cashed in from this recent crazy period of casino capitalism, it is a fitting venue for the first AGM away from Sin City since the bank listed in 1996.
As usual the bank has pre-released all its AGM material and it is clear that they are not giving an inch on the question of whether the Macquarie Model is broken. That said, the stock is up 6% to $49.40 out of relief that the presentations contained no shocks.
Check out the 61 page presentation pack along with the 4 page press release stressing that beating the bank's record $1.8 billion net profit from last year will be "increasingly challenging".
This will be round seven with Macquarie, and the sixth AGM, making the Millionaire Factory our second favourite sparring partner after News Corp. The full archive of previous Macquarie battles is available here.
If you've got a few spare minutes, log onto the webcast here because this should be a cracker given the remarkable past 12 months and Macquarie's status as the most issues-rich company on the Australian market.
The Peter Costello question
The opening question for co-founder and chairman David Clarke today will be very brief and direct: "Good morning chairman, why haven't we secured Peter Costello's signature yet?"
An honest answer would be that Costello and new Macquarie CEO Nicholas Moore hate each other, but given the huge stable of former politicians that the bank has hired (Bob Carr, Alan Stockdale, Warwick Smith, Ross Cameron, Rob Knowles etc), it will be interesting to hear Clarke's response.
Is the Macquarie Model dead?
After that, there is a plethora of issues to work through with the most important being the future survival of the Macquarie Model of listed infrastructure funds. Babcock & Brown CEO Phil Green declared a wholesale review when asked about this issue at his AGM in May.
The recent Macquarie Airports AGM saw these arguments raised but chairman Max Moore-Wilton was dismissive, yet the discount applying to the likes of Macquarie Airports and Macquarie Infrastructure Group has only got bigger since.
For instance, MIG shares closed at $2.35 last night, yet it claims to have net tangible assets of $4.59. The fund itself has $850 million in cash but the individual tollroad assets are loaded up with $9.6 billion billion in debt and they have been borrowing to pay distributions which is a practice that many companies are now rejecting.
The bank paid more than $1 billion for its respective 16.21% and 22.9% stakes in MIG and MAP yet they are today valued by the market at $914 million and $966 million respectively.
A key issue today will be establishing the book losses on these and the other funds and whether the auditor PwC is going to insist on more writedowns in the coming half, on top of the modest $300 million that was clipped from the real estate funds as of March 31.
I picked up 1500 MIG shares last week at $2.01 and sold them on Wednesday for $2.37 and there is gathering talk that some big moves are coming.
Last month's privatisation proposal for Macquarie Capital is instructive when the bank put together a consortium of offshore investors to bid $3.40 in cash - a 62% premium to the previous closing share price.
You can imagine exactly the same thing happening to MIG and MAP, although there is the complicating factor of such a move triggering pre-emptive rights with the co-owners of some of the tollroad and airport assets and possibly even some debt reviews.
Other questions to ask
In terms of other issues to raise, we'll be picking and choosing our way through these:
* Well done for shifting the bonus system away from cash to more shares and was it last year's shareholder revolt that triggered this?
* How much should we blame short sellers for the halving of the share price and how much is it the new reality of the credit crunch?
* How far under water are our collective investments in all the listed Macquarie funds?
* Why is PwC still auditing us and most of our funds when Babcock has a policy of different auditors to preserve independence?
* If we really are so strong, why haven't we been pouncing on weakened rivals in his extraordinary environment or at least buying back our shares to take on the short sellers?
* That was a brilliant effort to produce a record $992 million in net trading income in the latest half. How did you do it in such volatile times and why did treasury and trading boss Andrew Downe see his overall pay tumble from $21.5m to $14.9m?
* Why didn't we make bigger asset write-downs in the struggling property division?
* Are you going to get the BrisConnections float away and if it so good why are we flipping it into an IPO in such a rotten market?
* The Centro collapse has tarred the model of companies lending executives money to buy shares so will chairman David Clarke be refinancing his $35 million Macquarie loan and what about Nicholas Moore's $12.25 million loan?
* What rules does the bank have on staff carrying margin loans and do all loans have to be with Macquarie?
* Why keep fighting this debilitating defamation battle against The Australian, especially now that the journalist Michael West has defected to Fairfax anyway?
* Why has Macquarie pulled out of the inquest over the death of Beaconsfield gold miner Larry Knight in the rock fall on Anzac Day 2006?
* Why does our new CEO privately own the trade magazine Australian Banking & Finance (see details in July 7 edition) and should we expect Macquarie to be named "Investment bank of the year" every year?
Macquarie has a strange model where they deluge the market with formal presentations (check out the avalanche with the annual profit result on May 20) but then don't say too much informally or between times.
Whilst Babcock & Brown CEO Phil Green has been everywhere (check out this KGB interrogation on Business Spectator in March before the share price collapse in June), Macquarie CEO Nicholas Moore has really kept his head down, such that today will be the first opportunity to really see him deal with the implications of the credit crisis, if chairman Clarke doesn't hog the microphone too much.
We'll give you a special report of all the action plus the edited audio highlights before close of business today.
That's all for now.
Do ya best, Stephen Mayne
* The Mayne Report is a multi-media governance website published by Stephen Mayne with occasional email editions. To unsubscribe from the emails click here.
greetings from the RACV library in Melbourne's Bourke St as we get ready to head down to the Macquarie Group AGM which started 10 minutes ago at Melbourne's Crown Casino.
Given that Macquarie negotiated PBL's $1.8 billion purchase of Crown 10 years ago and the way the Millionaire Factory has cashed in from this recent crazy period of casino capitalism, it is a fitting venue for the first AGM away from Sin City since the bank listed in 1996.
As usual the bank has pre-released all its AGM material and it is clear that they are not giving an inch on the question of whether the Macquarie Model is broken. That said, the stock is up 6% to $49.40 out of relief that the presentations contained no shocks.
Check out the 61 page presentation pack along with the 4 page press release stressing that beating the bank's record $1.8 billion net profit from last year will be "increasingly challenging".
This will be round seven with Macquarie, and the sixth AGM, making the Millionaire Factory our second favourite sparring partner after News Corp. The full archive of previous Macquarie battles is available here.
If you've got a few spare minutes, log onto the webcast here because this should be a cracker given the remarkable past 12 months and Macquarie's status as the most issues-rich company on the Australian market.
The Peter Costello question
The opening question for co-founder and chairman David Clarke today will be very brief and direct: "Good morning chairman, why haven't we secured Peter Costello's signature yet?"
An honest answer would be that Costello and new Macquarie CEO Nicholas Moore hate each other, but given the huge stable of former politicians that the bank has hired (Bob Carr, Alan Stockdale, Warwick Smith, Ross Cameron, Rob Knowles etc), it will be interesting to hear Clarke's response.
Is the Macquarie Model dead?
After that, there is a plethora of issues to work through with the most important being the future survival of the Macquarie Model of listed infrastructure funds. Babcock & Brown CEO Phil Green declared a wholesale review when asked about this issue at his AGM in May.
The recent Macquarie Airports AGM saw these arguments raised but chairman Max Moore-Wilton was dismissive, yet the discount applying to the likes of Macquarie Airports and Macquarie Infrastructure Group has only got bigger since.
For instance, MIG shares closed at $2.35 last night, yet it claims to have net tangible assets of $4.59. The fund itself has $850 million in cash but the individual tollroad assets are loaded up with $9.6 billion billion in debt and they have been borrowing to pay distributions which is a practice that many companies are now rejecting.
The bank paid more than $1 billion for its respective 16.21% and 22.9% stakes in MIG and MAP yet they are today valued by the market at $914 million and $966 million respectively.
A key issue today will be establishing the book losses on these and the other funds and whether the auditor PwC is going to insist on more writedowns in the coming half, on top of the modest $300 million that was clipped from the real estate funds as of March 31.
I picked up 1500 MIG shares last week at $2.01 and sold them on Wednesday for $2.37 and there is gathering talk that some big moves are coming.
Last month's privatisation proposal for Macquarie Capital is instructive when the bank put together a consortium of offshore investors to bid $3.40 in cash - a 62% premium to the previous closing share price.
You can imagine exactly the same thing happening to MIG and MAP, although there is the complicating factor of such a move triggering pre-emptive rights with the co-owners of some of the tollroad and airport assets and possibly even some debt reviews.
Other questions to ask
In terms of other issues to raise, we'll be picking and choosing our way through these:
* Well done for shifting the bonus system away from cash to more shares and was it last year's shareholder revolt that triggered this?
* How much should we blame short sellers for the halving of the share price and how much is it the new reality of the credit crunch?
* How far under water are our collective investments in all the listed Macquarie funds?
* Why is PwC still auditing us and most of our funds when Babcock has a policy of different auditors to preserve independence?
* If we really are so strong, why haven't we been pouncing on weakened rivals in his extraordinary environment or at least buying back our shares to take on the short sellers?
* That was a brilliant effort to produce a record $992 million in net trading income in the latest half. How did you do it in such volatile times and why did treasury and trading boss Andrew Downe see his overall pay tumble from $21.5m to $14.9m?
* Why didn't we make bigger asset write-downs in the struggling property division?
* Are you going to get the BrisConnections float away and if it so good why are we flipping it into an IPO in such a rotten market?
* The Centro collapse has tarred the model of companies lending executives money to buy shares so will chairman David Clarke be refinancing his $35 million Macquarie loan and what about Nicholas Moore's $12.25 million loan?
* What rules does the bank have on staff carrying margin loans and do all loans have to be with Macquarie?
* Why keep fighting this debilitating defamation battle against The Australian, especially now that the journalist Michael West has defected to Fairfax anyway?
* Why has Macquarie pulled out of the inquest over the death of Beaconsfield gold miner Larry Knight in the rock fall on Anzac Day 2006?
* Why does our new CEO privately own the trade magazine Australian Banking & Finance (see details in July 7 edition) and should we expect Macquarie to be named "Investment bank of the year" every year?
Macquarie has a strange model where they deluge the market with formal presentations (check out the avalanche with the annual profit result on May 20) but then don't say too much informally or between times.
Whilst Babcock & Brown CEO Phil Green has been everywhere (check out this KGB interrogation on Business Spectator in March before the share price collapse in June), Macquarie CEO Nicholas Moore has really kept his head down, such that today will be the first opportunity to really see him deal with the implications of the credit crisis, if chairman Clarke doesn't hog the microphone too much.
We'll give you a special report of all the action plus the edited audio highlights before close of business today.
That's all for now.
Do ya best, Stephen Mayne
* The Mayne Report is a multi-media governance website published by Stephen Mayne with occasional email editions. To unsubscribe from the emails click here.