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Australia
This page considers Australia as an exporter and consumer
of private equity.
It covers -
 introduction
Australia is an attractive location for investment because
of permissive regulation (lighter, quicker and arguably
more certain than comparable states such as France and
Italy), a culture that is 'private equity friendly' (eg
few major criticisms of funds as locusts') and an economy
that although expanding more slowly than parts of Asia
is stable and outpacing growth in much of Europe.
It is also generating substantial capital for investment
at home and offshore, particularly because government
has shifted pension burdens to individuals and employers,
thereby driving growth of superannuation funds. One industry
figure quipped that "It's a lot of money to invest
and you can't forever be buying and selling BHP shares
to each other"
Industry superannuation funds for example had around $70bn
invested in 2006, with some $14bn new contributions and
dividends for investment per year. The overall superannuation
fund sector deployed assets of $600bn, with annual reinvestment
of around 14%.
Australia has thus seen a succession of takeovers under
private equity fund auspices, albeit with indifferent
results for small investors who acquired shares during
subsequent IPOs, and expansion offshore by several funds.
regulation
Foreign investment in Australia is broadly regulated by
the Foreign Acquisitions & Takeovers Act 1975
(FATA),
with a general rule that federal government approval is
required for acquisition of 15% or more of an Australian
company with gross assets of over $50m, acquisition of
an Australian business with gross assets of over $50m
and investment of more than $10m in a new business. As
with other nations, some investments in 'sensitive industries'
such as banking, media, telecommunications, aviation,
real estate and defence also require approval.
Implementation of the Australia-United States Free Trade
Agreement (FTA) in January 2005 raised the threshold for
federal government approval of most US investment proposals
from $50m to $800m. It is expected to reduce compliance
burdens for those private equity funds with a predominantly
US investor base.
reception
Reception of private equity deals has been largely uncritical,
marked by celebration of Macquarie and its local peers
as national champions buying landmark assets in other
parts of the world and breathless coverage of Macquarie
as a machine for making millionaires - ie its senior staff,
rather than mums and dads.
Macquarie
Unfairly or otherwise, Macquarie Bank has attracted much
of the same adulation - and in time will presumably accrue
the same opprobrium - as was garnered by offshore peers
such as Cinven and KKR. In the Australian media it has
overshadowed competitors such as Babcock & Brown or
Pacific Equity Partners.
It traces its origins to merchant bank Hill Samuel Australia
(HSA), a subsidiary of London banker Hill Samuel &
Co. Limited. HSA began operation in Sydney in 1970 and
became Macquarie Bank Limited in 1985, following deregulation
of the Australian financial market and takeover of its
UK parent by Trustee Savings Bank (TSB), in turn engulfed
by Lloyd's Bank.
Macquarie listed on the Australian Stock Exchange (ASX)
in 1996 with a market capitalisation of $1.3 billion.
It subsequently expanded aggressively through development
of infrastructure and other investment funds, which included
an Australian tollway and the $5.6 billion acquisition
of Sydney airport.
As of 2005 it is a $14.5 billion investment bank operating
in 23 countries. It has been characterised as making its
money
by
extracting substantial fees at every stage - advising
on the sale of the assets to the trust, underwriting
the subsequent float, continuing management of the trust
and meeting performance targets
and through direct stakes in particular funds. In 2005
over 40% of Macquarie's earnings came from outside Australia,
a percentage that will presumably increase.
Major interests under several listed and unlisted infrastructure,
tourism, retail property, nursing homes and airport funds
include -
- Macquarie
Airports - stakes in Sydney, Birmingham, Rome, Bristol
and Brussels International airports
- Macquarie
Infrastructure Group - stakes in 12 toll roads across
six nations (inc M6 motorway in UK, Canada's 407ETR,
SR-125 South in San Diego)
-
Macquarie Communications Infrastructure - stake in Arqiva
(owns and operates over 3,000 UK television transmission
towers sold by NTL
in 2004 for £1.27bn) and in Broadcast Australia
(600 transmitter sites across Australia used by public
broadcasters including ABC
and SBS)
- acquisition
of RG
Capital Radio network in Australia
- Taiwan
Broadband Communications, acquired for $1.19bn
-
10% of Macquarie Capital Alliance - has 65% of Creative
Broadcast Services Ltd, channel management and creative
services arm formerly owned by BBC
and known as BBC Broadcast Services. Macquarie Bank
directly owns 35% of the business
- Thames
Water - Britain's largest water company, acquired by
a Macquarie consortium for US$15bn in 2006.
major
private equity deals
Major deals within Australia have included -
- Affinity
Healthcare - CVC Asia Pacific, Ironbridge Capital Ltd.
and GIC Special Investments nearly double original invested
capital after having held hospital operator (sold to
Ramsay Health Care for $1.43bn) for 18 months
- Brambles
- KKR acquires Australian waste management operations
for $1.83bn
- DCA
Group - CVC Asia Pacific agrees to buy healthcare chain
for $1.7bn
- Godfreys
- Pacific Equity Partners and CCMP Capital Asia buy
specialist retailer for $300m
- Guardian
Health - PEP sells NZ healthcare chain to DCA Group
for NZ$300m a year after acquisition for NZ$230m
- Impulse
Airlines - along with Fairfax the salient example of
deal that burnt the funds
- Just
Group - returns over four times invested capital through
acquisition and disposal of clothing retailer
- Myer
- Texas Pacific/Newbridge acquires Myer department stores
for $1.4bn
- Pacific
Brands - acquisition in 2001 by CVC and Catalyst Investment
Managers (Prudential offshoot) for $730m, IPO in 2004
returns over seven times of invested capital to PE funds
- Pacific
Handling Solutions (Loscam) - DB Capital Partners (private
equity investment arm of Deutsche Bank) returns 4.5
times invested capital through sale to Affinity Equity
Partners in 2005.
- PBL
Media - CVC takes half share in PBL's broadcast and
publishing operations, including dominant commercial
television network
- Repco
- acquired for $265m in 2001 by GS Private Equity, Gresham
Private Equity and Macquarie; IPO in 2003 for $442m
- Taverner
Hotel Group - Catalyst estimated to have 26% internal
rate of return for investment in hotel operator over
four years
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