A winning day, in the end for Macquarie Group.
The shares fell the most for five months after the shares were relisted, down 8% at $30.25.
But by the close they climbed back up 54c ahead of Thursday’s close at $34.02. That gave all those who took up the placement a nice profit of $7 a share.
The shares didn’t trade on Friday as they were placed in a trading halt while Macquarie conducted the equity raising.
Macquarie on Friday revealed $2.5 billion in asset and loan write-downs for the 12 months to March, pushing net profit down 52% to $871 million and its total annual dividend down 46%.
It was the first annual profit decline in 17 years and it had some mixed reactions from analysts yesterday:
Goldman Sachs JBWere said: "MQG remains a long-term proposition for those investors looking for upside leverage to an eventual recovery in market conditions, coupled with a balance sheet position that has significantly derisked. However, the stock is likely to remain volatile in the short-term and is not for the faint-hearted".
Bank of America-Merrill Lynch cut the shares to “neutral” in a research note released citing “disappointing” earnings.
“Macquarie has remained profitable through the crisis however we see further risk to core revenues." The profit result, Merrills said “lacked evidence of new business streams driving a significant return to growth or arresting concerns over medium-term outlook for specialist unlisted funds”.
Goldman Sachs said: "The market outlook remains uncertain and the risk of further impairments remains an overhang. However, in our view MQG has significant capital to manage such risks with excess capital of $3.1bn (potentially ~$4.3bn post equity raisings).
"Despite being broadly in line with consensus expectations, composition was also weaker than expectations with one-off gains ($197m financing gain in MIPS and $274m unrealised gain on sub-debt), an effective tax rate of 1.7% and higher than expected write-downs."
Macquarie sold 20 million shares at a 19% discount to raise $540 million and announced a share purchase plan for ordinary shareholders, which may raise up to $200 million. It’s also raising about $500 million to cover staff bonuses, subject to shareholder approval.
Macquarie reported a 64% slump in second-half profit to $267 million.
Credit Suisse said Macquarie has now “substantially completed its funding mix reorientation and its targeted business line exits”.
They were more optimistic than some other analysts. They said Macquarie will now seek to grow market share, capitalizing on competitor weaknesses and concentrating on energy trading and European and US securities and credit trading.
It expects incremental acquisitions, focused on areas such as North American and European securities, oil and gas advisory, specialized asset managers and specialty leasing.
“Just as specialist funds management might have been seen as Macquarie’s key growth driver at the start of the decade, we see energy trading, and to a lesser extent securities, in the same light today,” the analysts wrote.
And Citigroup analysts said: "With operational earnings continuing to outperform market conditions and exchange volumes possibly having bottomed, we continue to view the earnings risk as to the upside.
"While a capital raising could weigh on the stock, it will remove questions over adequacy."
One deal that will help Macquarie is the proposed $1.37 billion takeover for Macquarie Communications Infrastructure Group (MCG) which yesterday got the green light from independent experts.
The Canada Pension Plan Investment Board (CPPIB) has offered $2.50 cash for every MCG stapled security, valuing MCG at $1.37 billion and implying an enterprise value including debt of $7.3 billion.
Potentially there is a big cash bonus for Macquarie Group because it will sell its management rights, and receive cash for its holding in MCG.
The offer, to be implemented via a scheme of arrangement, was revealed more than a month ago as MCG conducted a review of assets as it sought to halt a decline in value for its securityholders.
MCG’s independent directors have supported the takeover from one of Canada’s largest institutional investors (and an occasional infrastructure business partner of Macquarie Group). But acceptance was subject to a report by an independent expert.
In a scheme booklet sent to MCG security holders yesterday, the company’s independent directors said the takeover proposal had received approval from Deloitte Corporate Finance.
"The independent expert has valued MCG at $2.27 to $3.13 per MCG security and concluded that the CPPIB proposal is fair and reasonable and therefore in the best interests of MCG securityholders," the directors said in a statement to the ASX.
MCG’s three businesses comprise Australia’s largest independent broadcast transmission services provider Broadcast Australia, UK TV and radio broadcast transmission services business Arqiva and Great Britain emergency services communications provider Airwaves.
Like Macquarie Group’s other satellite funds, MCG securities been subjected to concerted selling in the last 18 months over concerns about the company’s ability to meet its outstanding debt, particularly in current credit market conditions.
MCG’s independent directors said they considered CPIBB’s fully financed cash offer to be attractive.
"We are confident, in the face of the added risk profile created by ongoing disruption in equity and debt capital markets, that the acquisition of MCG by CPPIB i
