MAp's payout price on high side
The Age
Saturday August 8, 2009
MACQUARIE Airports' proposed payment to Macquarie Group would be $88.2 million at most if the parent's management rights had been priced using the average of a valuation methodology Grant Samuel has used in its role as an independent expert.But in its role as an adviser to MAp's independent directors, Grant Samuel has been party to a deal that proposes MAp pays $345 million to Macquarie Group.In its independent experts' report on the proposed buy-out of management rights for the listed Viridis Clean Energy Group, dated July 10, Grant Samuel listed eight separate buy-outs of management rights between 2000 and 2008.The comparison was used to cross-check the value placed on the buy-out of VCEG's management rights from Viridis Energy Capital.The document lists the management buy-out as a multiple of the annual revenue received by the fund's manager.The price of the buy-outs ranged from 0.3 times revenue (the buy-out of Babcock & Brown Capital's manager in December last year) to 5.8 times revenue (the buy-out of Challenger Financial Services Group's manager in November 2003).Based on the $33.6 million in reported revenue Macquarie Group received from MAp in 2009, the values imply a range in the fee MAp should pay from $10 million to $195 million.The average of all eight transactions was a buy-out fee of 2.6 times revenue, implying a fee for the MAp management internalisation of $88.2 million.Grant Samuel also included two other methods of calculating the buy-out fee; both implied average management buy-out fees of below $88.2 million on the MAp transaction.In its report Grant Samuel cautioned about relying on the multiple analysis because of varying circumstances in the management buy-outs.But it said the analysis gave general guidance that the VCEG buy-out, priced at 2.8 to 3.5 times the revenue received by the manager, was reasonable.(Not reasonable enough for VCEG shareholders, who have negotiated a revised proposal cutting the pay-out by 14 per cent to $2.76 million. A shareholder vote is due on August 19.)Market sentiment against the fee negotiated by the independent MAp directors remains high, particularly given that shareholders can vote out the manager without paying a fee.
© 2009 The Age
