Macquarie's taxi play, more Eddington gigs, a Babcock shafting and 25 more Rich Listers

April 7, 2008

Dear Mayne Reporters,

The Millionaires' Factory buying up Melbourne taxi licences! Yep, with the ears pinned back. Unfortunately, floating such a beast on the stock exchange won't be easy when the listed fund model is so on the nose and about to take a major hit. Click through for more, plus an interesting contrast between the way Macquarie and Babcock & Brown treat their small shareholders.

The power was out in the Mayne Report bunker for four hours yesterday, but we still managed to produce this video exploring another lively mailbag.

There were appearances on Sky Business Channel last night getting stuck into the $3 million payout to Centro CEO Andrew Scott and SBS World News Australia ripping into sharemarket scavenger David Tweed, who is doing his usual thing making a low ball offer to Newcastle-based health fund NIB. However, small NIB shareholders have already been mightily ripped off by their own board and management as part of last year's float. Check out how here.

Sir Rod Eddington's workload gets another workout tonight as we've discovered two new boards, bringing his total portfolio to a ridiculous 11 gigs. And speaking of long lists, we've also got another 25 names for the burgeoning Mayne Report Rich List.

Finally, Roger Corbett has just popped up on Lateline Business launching the Salvation Army's Red Shield Appeal earlier today. That would be the same Roger Corbett who put Woolworths into 11,000 poker machines as part of its plans to corner the grog market. When Roger donates some of his $80 million fortune to reducing problem gambling, we'll take his charity work more seriously.

Enjoy the full edition and do ya best, Stephen Mayne

Can the Macquarie model survive?

Macquarie Group pioneered the model of parking infrastructure assets in listed funds and then milking them for huge base, performance, advisory and debt management fees.

After a decade of glorious profits the model is now under severe stress with investors in some of the funds under water as many of them trade at huge discounts to net asset backing. But is the Millionaire Factory taking a backward step? Not on your Nellie.

I was in town tonight giving a speech on corporate governance at the RACV to a group of IT professionals involved in internal audit. During the course of the evening I learnt that Macquarie has bought 187 taxi licences in Melbourne as part of a plan to acquire 250 and then float them on the stock exchange.

Given the debacle that was Lime taxis in Sydney - see this story on The 7.30 Report - you would think the bank might have been scared off the industry. Not so, it seems. A licence is worth about $470,000 and Macquarie has so far spent about $80 million. The bankers naturally don't drive the cabs, instead renting them out at $2400 a month, which is regarded as excessive.

However, AMP does a similar thing and it owns about 500 licences in Melbourne which it then offers as an investment class to clients. Macquarie is also pushing into wine, agriculture and even beef properties for a planned agriculture fund, so they don't appear to be slowing down.

That said, there is talk that a landmark study is about to be released which casts serious doubts on the sustainability and credibility of the Macquarie model.

With the Macquarie impersonators such as MFS and Allco falling over, I reckon the model is stuffed. A spate of collapses have placed corporate governance front and centre again and these huge discounts are simply unsustainable. The rational response is to wind them up or internalise the management. Babcock & Brown is starting to head down that track but Macquarie still hasn't awoken to the new reality.

Rather than launching a new taxi fund, surely the priority now is closing that huge NTA discount which is bedevilling the whole listed fund model.

Shafted by Babcock on the SPP

Alinta shareholders who were showered with Babcock scrip as part of last year's takeover got burnt if they took up the subsequent $5000 share purchase plans that were offered to the small punters. The roll call is as follows:

Babcock & Brown Power: raised $44 million last November at $2.88. Now $1.76.

Babcock & Brown Infrastructure: raised $53 million at $1.23. Finally back to that level today after hitting a recent low of 89c.

Babcock & Brown Wind: raised $47 million at $1.72 last October. Now $1.62.

Whilst it is dilutionary and poor form to raise new capital after a share price plunge, it is an even worse offence to do this through an institutional placement without delivering a follow-up SPP for small investors.

Babcock & Brown have done precisely that with the recent $220 million placement to a select group of institutions at the knockdown price of $13.65. The stock has since recovered to $15.38 but all us investors who got burnt in those other Babcock SPPs are not being offered a chance to make a bit back.

Whilst Macquarie Leisure raised the ire of some investors by doing a $20 million placement at $2.50 on March 19, at least the comparable SPP arrived in the mail today. Macquarie Leisure traded between $2.85 and $3.83 over the December half when the bank pocketed a $1.6 million base fee and a hefty $4.3 million performance fee. The stock then tanked to $2.50 and they're suddenly out their raising capital.

The big question in when Babcock & Brown will get off their butt and come through with an SPP as well. The flights are already booked for the Babcock AGM in Sydney next month and this issue will be on the long list of questions.

Check out this shame file of companies which do placements but don't follow through with a share purchase plan.

Even more gigs for Sir Rod Eddington

The busiest man in Australia, Sir Rod Eddington, spent 40 minutes in the 774 ABC Melbourne studio with Jon Faine this morning, facilitating debate about his ground-breaking report into Melbourne's future infrastructure needs.

Sir Rod was clearly very hands on in his research for "East West Link Needs Assessment" as he confessed to having twice caught the morning bus from Doncaster, just near our place, into the Melbourne CBD to see how the bus lanes flow.

In terms of making an impact, Sir Rod's timing was unfortunate because media coverage over the past 36 hours has been absolutely swamped by the extraordinary wind storms that hit Melbourne yesterday.

This meant that Faine was juggling callers moaning about the power still being off with those wanting to hit Sir Rod with questions about his enormous $18 billion road, tunnel and public transport shopping list.

We've previously complained about Sir Rod's crazy workload but have just discovered another two board gigs which would have made him perfectly suited to comment about the power outages. You see, Sir Rod sits on the board of CLP Group, the enormous Hong Kong-based power company which also owns $5 billion worth of Australian energy assets, including gas and electricity retailing business that service more than 1 million homes in Victoria, South Australia and NSW.

This biography on the CLP website also reveals that he is a director of the Australian subsidiary, TRUenergy Holdings Pty Ltd. This means the complete CV of Australia's busiest man reads as follows:

News Corp: senior independent director keeping Rupert honest

Rio Tinto: one of only two Australian-based directors and trying to fend off hostile BHP bid.

JP Morgan: chairman of Australasian business which has a $2 billion exposure to Centro.

Allco Finance Group: independent director supposedly leading negotiations with banks, including JP Morgan.

Swire & Sons: family controlled Australian transport and cold storage business which turns over about $300 million a year.

CLP Group: independent director of one of Asia's biggest power companies.

TRUEnergy Holdings: director of CLP's Australian subsidiary with $5 billion in assets

Melbourne Major Events: chairman of the body which is meant to land big events for Melbourne.

Infrastructure Australia: chairman of Kevin Rudd's new body which will nationally plan our infrastructure needs.

Business Advisory Council: chairman of Kevin Rudd's formal bridge to the business community.

East West Link Needs Assessment: chaired major blue-print into Melbourne's transport needs.

By any standards, this is simply ridiculous.

Another 25 Mayne Report Rich Listers

The new names continue to pile up on the Mayne Report Rich List which is now approaching 900 names. This batch concentrates on sporting and entertainment types:

Andrew Bogut: professional basketballer in the NBA playing with the Milwaukee Bucks. Originally from Melbourne, he moved to the US to play for the University of Utah as a teenager.

Murray Cook: founding member of the world famous The Wiggles, most of the wealth is generated from touring and dancing with children globally.

David Cox: a former senior executive of Mincom, he pocketed $16.3 million when Mincom was bought out by US private equity house Francisco Partners in 2007.

Ken Done
: becoming one of Australia's foremost painters, his fortune holds at $8 million but is fighting the Commonwealth bank, claiming, through mismanagement, his trust fund should be closer to $61.5 million.

Jeff Fatt: the oldest member of The Wiggles, he was once member of 80's rock band the Cockroaches.

Anthony Field: founding member of the world famous The Wiggles, most of the wealth is generated from touring and dancing with children globally.

Bruce Hales: the Elect Vessel of the Exclusive Brethren church and leader of over 40,000 followers worldwide, he constantly receives cash and property donations from followers. He has control over a vast network of properties and also looms over the 800 Brethren businesses spread across New Zealand, and more worldwide.

Daniel Johns: along with Ben Gillies and Chris Joannou formed their band at the age of 12, originally named the Innocent Criminals, which famously became Silverchair. Also was a part of the experimental band The Dissociatives.

Rod Leissle and John Tyrrell: behind the phenomena of what has become Bjorn Again - an ABBA tribute band. The most successful tribute band in the world with 5 franchises playing anywhere in the world at any one time.

Baz Luhrmann: has become one of Australia's leading film directors responsible for Strickly Ballroom, Romeo and Juliet and Moulin Rouge!

Richard Mathews: the once chief executive of Mincom, will walk away with $26.8 million for the 2007 financial year, after engineering a $315 million buy out.

Gerry McGowan
: former Impulse Airlines CEO who is now on the board of CBD Energy which owns a wind farm on King Island and recently received a government grant of $20 million to assist development of $360 million solar energy farm which McGowan boasts will create a $400 million export market.

David Merson
: a former senior executive of Mincom, he pocketed $16.6 million when Mincom was bought out by US private equity house Francisco Partners.

Newsboys: with more success in the US than in their home country of Australia, and members of the band changing, their are still the world's biggest Christian rock act.

Gregory Page: founding member of the world famous The Wiggles, most of the wealth is generated from touring and dancing with children globally.

Chad Reed: unheralded, he is an Australian Supercross champion with huge success in the US and annual earnings of $6 million.

Geoffrey Rush: the first Australian-born person to win an Academy Award for acting, he continues to shine on top of his profession.

Christine Santic: the estranged wife of Tony Santic - tuna king and owner of record breaking Melbourne Cup winner Makybe Diva, has just reportedly secured an Australian record separation payout of $125 million.

Adam Scott: Australia's best young golfer with annual earnings around $8 million.

David Tweed: renowned for offering no-value deals to shareholders, although he has broken no law, he has been quoted as saying " I didn't do morals at school". A scavenger worth more than $20 million.

Jim Wall
: executive chairman of CBH, he is not one to take a backward step went faced with a challenge. When heading junior zinc company Savage Resources, he took on resources giant WMC over the massive Ernest Henry deposit - and won, and now faces his shareholders who want to toss him off the board.

Mark Webber: part of the Red Bull F1 racing team, and since his debut has annual earnings upwards of $8 million.

Harvey Went
: a former founder of Mincom cashed in his shares pocketing $26.3 million before tax.

Angus Young: guitarist, songwriter, and co-founder of the Australian hard rock band AC/DC.

Malcolm Young
: brother to Angus, he also is a co-founder and songwriter for AC/DC, one Australia's most successful rock exports.

Check out all the Mayne Report business lists here.