There’s nothing like a big deal and a profit upgrade which suggests a record near $2 billion full year profit from Macquarie Group (MQG), to get investors salivating.
Macquarie yesterday revealed a $400 million institutional fund raising to underwrite its purchase of the $7.2 billion worth of assets in Esanda, the ANZ’s car financing finance company.
About $6.2 billion of the Esanda assets are retail receivables (from cars sold), while $1.6 billion are other finance offered to car dealers to finance their floor plan (stocks).
And it also upgraded its earnings guidance for a second time in less than a month and that was probably the big news from yesterday’s announcement. It will set a light under Macquarie shares when trading resumes after the placement.
Macquarie said it had agreed to pay $8.2 billion for Esanda. The ANZ has been looking to sell this business for the past six months or more and Macquarie has long been the most logical buyer.
The $8.2 billion includes debt, and Macquarie said it will almost double its motor vehicle finance portfolio to around $17 billion.
The bank upgraded its earnings guidance for its interim and full-year results, putting it on track to report a profit of close to $2 billion for the year ended March 31 next year.
In addition to the $400 million placement to institutional investors Macquarie will run a share purchase plan for eligible shareholders, to help fund the deal. JPMorgan, Macquarie Capital and Bank of America Merrill Lynch are managing the raising.
Investors are being asked to buy stock at a small discount to where Macquarie’s shares last traded at $77.84. The shares were issued to big shareholders at a price range of $75.50 to $77.80, according to media reports.
MQG 1Y – Macquarie to buy ANZ’s Esanda unit
Macquarie chief executive Nicholas Moore said in a statement the purchase was another example of the firm’s growth in “annuity style” businesses, which are less leveraged to financial markets.
“Macquarie has been a long-standing supporter of the motor vehicle industry," he said yesterday. "The [Esanda] portfolio is in a market in which Macquarie has significant expertise and has successfully integrated similar acquisitions, such as GMAC and Ford portfolios."
Macquarie said earnings for the six months ended September 30 would be up 55% on the same period last year (compared to earlier guidance for a 40% rise).
And while the second-half result would be lower than the preceding six months, Macquarie said overall profit for the year ended March 31 would be higher than last year.
That suggests a first-half profit of around $1.05 billion, and a full-year result of close to $2 billion, which would be a record.
Macquarie’s highest annual profit to date was $1.8 billion in 2008.
Macquarie last raised new capital in March in a $500 million placement and a share purchase plan to help fund the acquisition of a portfolio of aircraft leases.
Macquarie said it expects to pay an interim dividend of $1.60 a share.