Investment Banking Group
Chairman's and Managing Director's Report
Investment Banking Group had another excellent year, reporting an increased contribution, strong deal flow and continued operational expansion.
The Group now has $A36.6 billion in equity under management, specialist funds in most of the major capital markets and leading market positions in a number of established businesses.
Investment Banking Group (IBG) achieved an excellent result with a contribution 30 per cent up on 20051. Corporate Finance
Strong equity market conditions during the year resulted in significant deal flow across the regions with the advisory and equity capital markets (ECM) businesses continuing to perform strongly across most industry sectors.
We maintained our leading market positions with Macquarie achieving No. 1 rankings in Australia for completed mergers and acquisitions and Australian equity raised (Thomson Financial), as well as the No. 1 ranking in Asia-Pacific for completed project finance mandates (Project Finance International) .
Growth in the investment banking funds (IBF) business, formerly infrastructure and specialised funds (ISF), continues to be an important global focus for us. Our funds have returned a compound annual rate of 20.1 per cent 2 for investors since inception.
IBF equity under management grew by 32 per cent 3 to $A34.4 billion from $A26.0 billion for the year. This was primarily due to the establishment of five new funds and the IPO of a previously unlisted fund:
- Macquarie Capital Alliance Group (MCAG), a fund with a broad investment mandate (excluding property) which listed on the ASX in April 2005.
- Macquarie International Infrastructure Fund (MIIF), a fund investing directly and indirectly in a diversified portfolio of global infrastructure assets which listed on the SGX in May 2005.
- Macquarie Media Group TM (MMG), a fund investing in media assets globally which listed on the ASX in November 2005.
- Macquarie Korea Infrastructure Fund (MKIF), a fund investing predominantly in South Korean toll roads and tunnels, listed on the KRX and LSE in March 2006. MKIF is jointly managed with Shinhan Bank.
- Macquarie Korea Opportunities Fund (MKOF), an unlisted fund in Korea investing in Korean infrastructure and other specialised assets.
- Global Star, an unlisted Korean private equity fund, jointly managed with Ilshin Investment Company.
Asset acquisitions
Quality assets are continually sought by the funds to enhance investor value. In Australia and New Zealand, Macquarie and/or Macquarie managed specialist funds acquired five retirement care/aged care facilities. In Asia, four roads and a subway in Korea, a road in Japan , a sea cargo port in China, broadcast communications companies in Taiwan and Korea
and two energy companies in Korea, were acquired.
In North America, acquisitions included two roads,
an off-airport parking business, an airport services business, a gas company and a water utility company in the US, and two roads and three health and aged care facilities in Canada.
In Europe, acquisitions included an airport in Denmark, a toll road network in France, a tank storage business in Germany, a gas and electricity network in the Netherlands, directories businesses across eight European countries, headquartered in the Netherlands, and a greenfield sea cargo port in Poland. In the UK, two ferry services, a gas and electricity distribution business and a media services/broadcast playout provider were acquired.
Macquarie Securities
Our Australian and Asian institutional stockbroking business achieved an outstanding result. In Australia , strong equity markets and increased market share resulted in improved secondary market revenues. ECM deal flow remained steady although revenue was slightly down on last year. Our New Zealand market share improved significantly during the year.
Macquarie Securities Asia continues to perform well ahead of expectations with its results now equal to the Australian business. There were outstanding gains in secondary market revenues as a result of strong equity market conditions and increased market share. ECM revenues for the region were well up on last year.
The highlights for the year include starting our stockbroking operations in Malaysia and India and the establishment of the joint venture with TMB Bank, TMB Macquarie Securities, in Thailand.
Financial Products
Financial Products achieved a strong result due to
the continued expansion of international activities and growth in the size and range of retail products.
Ongoing initiatives include the establishment of an international distribution network for the funds and financial products generated within IBG and affiliated managers, as well as the launch of further infrastructure related products into retail and high net worth markets.
Macquarie Capital
A very strong result was achieved with lending and asset-based leasing volumes up 15 per cent to $A4.5 billion from $A3.9 billion. In addition to the strong contribution from existing leasing and lending activities, leasing initiatives in electronics, engines and meters are developing well, while international expansion continues.
Outlook
We expect to maintain our leading advisory, ECM and stockbroking domestic market positions and we will continue to pursue international growth across all businesses including opportunities for new funds in Europe, North America and the Middle East .
The Group is currently experiencing strong business activity and anticipates an increase in revenue and profit over the medium term, providing there is no material change in market conditions.
Highlights since 31 March 2005 include:
- Macquarie's role as Global Co-ordinator and Joint Lead Manager on the successful $A1.91 billion IPO
of explosives manufacturer, Dyno Nobel
- Establishment of a new North American diversified unlisted fund focusing on infrastructure and infrastructure-like investments in the US and Canada, Macquarie Infrastructure Partners (MIP)
- Establishment of a new European diversified unlisted fund focusing on infrastructure investments in Europe, Macquarie European Infrastructure Fund II (MEIF II)
- Established in April 2006, the ZonesCorp Infrastructure Fund is an unlisted infrastructure investment vehicle focused primarily on Zones Corp. projects in Abu Dhabi
- Announcement in April 2006 of a joint venture in Japan with Shinsei Bank Limited. The joint venture will focus on advisory services in relation to the acquisition and management of telecommunications, media and transportation assets in Japan.
The table shows key transactions during
the year.
| Region |
Description |
Australia/New Zealand |
-
Adviser to Transurban on the $A1.8 billion takeover of Hills Motorway Group
-
Adviser to The Australian Gas Light Company (AGL) on the $A1.42 billion acquisition of Southern Hydro's renewable assets portfolio
-
Adviser to the Macquarie Bank-led consortium on the $US1.7 billion acquisition of Dyno Nobel and the subsequent on-sale of Dyno Nobel's Latin American, European, African and Asian businesses to Orica Limited for $US685 million*
-
Adviser to the Westlink Motorway Group on the renegotiation of its $A1.25 billion debt facilities
-
Adviser to the sponsors, joint lead manager and underwriter on the $A340 million Royal Women's Hospital Public Private Partnership (PPP) project in Victoria
-
Global bookrunner and joint lead manager on the $A2.1 billion IPO of Goodman Fielder Limited
-
Joint adviser to Centennial Coal on the $A470 million takeover of Austral Coal
- Adviser to Transpacific Industries Group on its $A769 million proposal to merge with Waste Management New Zealand*
|
Asia |
-
Adviser to the project sponsors, equity and debt arranger on the $A441 million (KRW 344 billion) greenfield financing of the Incheon Bridge Project in South Korea
-
Adviser to Integrated Microelectronics Inc. on its $A158 million ($S201 million) acquisition of Speedy-Tech Electronics Limited in Singapore
-
Sole global co-ordinator on the $A642 million ($S809 million) IPO of Macquarie International Infrastructure Fund in Singapore
-
Adviser to the project sponsors on the $A505 million (RM1.37 billion) greenfield financing of the Senai-Pasir Gudang-Desaru Expressway in Malaysia
-
Adviser to the Macquarie Media Group-led consortium on the $A1.20 billion acquisition of Taiwan Broadband Communications*
- Sole global co-ordinator on the $A477 million ($S616 million) IPO of Macquarie MEAG Prime REIT in Singapore
|
The Americas |
-
Adviser to MIG on its bid with partner, Cintra Concesiones de Infraestructuras de Transporte, S.A. to acquire the $A5.12 billion ($US3.85 billion) Indiana Toll Road*
-
Adviser to Macquarie Essential Assets Partnership on the $A638 million ($C605 million) Sea-to-Sky Highway improvement project in Vancouver
-
Adviser to MIG on the $A823 million ($US617 million) investment in the Dulles Greenway toll road
-
Adviser to Guinor Gold Corporation on it's $A442 million ($US332 million) takeover by Crew Gold
-
Adviser to Macquarie Infrastructure Company on the $A317 million ($US238 million) pending acquisition of The Gas Company in Hawaii *
-
Adviser to Western Silver Corporation on the $A1.4 billion ($C1.2 billion) agreement by Glamis Gold to acquire the outstanding shares in Western Silver*
- Adviser to the Macquarie Bank-led consortium on the $A1.16 billion ($US860 million) agreement to acquire Aquarion Company*
|
UK /Europe, Africa and the Middle East |
-
Adviser to Macquarie Airports on the $A2.76 billion (DKK 8.22 billion) public market acquisition of Copenhagen Airport A/S in Denmark
-
Adviser to the Eiffage SA-led consortium on the $A11.3 billion (€7.1 billion) acquisition of the Autoroutes Paris-Rhin-Rhône motorway in France
-
Adviser to the Challenger Infrastructure Fund-led consortium on the $A1.2 billion (£465 million) acquisition of Inexus Group in the UK
-
Adviser to the project sponsors on the $A824 million (£337 million) Newcastle Hospitals PPP project in the UK
- Adviser to the European Directories S.A. consortium on the $A1.04 billion (€650 million) acquisition of the TDC Directories businesses in Europe
|
* Not completed at 31 March 2006.
1Adjusted to exclude significant effects of AIFRS.
2 Annualised return based on all capital raised, distributions paid and valuations (market capitalisation for listed funds and net asset value for unlisted funds) for IBF's funds since inception to 31 March 2006 (listed funds at 31 March 2006, unlisted funds as at 31 December 2005). Calculated on an AUD basis.
All cashflows converted at historic rates.
3 For listed funds – market capitalisation as at 31 March 2006 plus fully underwritten or committed future capital raisings. Invested and committed capital for unlisted funds. Invested capital for mandated assets (including third party investors in consortia which are led by Macquarie managed funds), MBL direct holdings and other funds. Jointly managed funds (SAIF, AIIF, DUET, MKIF, Global Star) included at 50 per cent of invested capital. Invested capital comprises actual capital drawn from investors, net of asset realisations returned to investors, plus firm investment commitments which will require a future call on investors. Exchange rates as at 31 March 2006.
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