CHAPTER 9

1 The bid, which formally expired on 28 February 2006, was one of three expressions of interest within a year, the first a formal bid from Deutsche Börse in December 2004, the second an indication of interest from Euronext, though that never turned into a formal offer. 

2 The Royal Exchange, a predecessor of the LSE, was founded in 1571 by Queen Elizabeth—the first. 

3 Bilateral deals are those agreed between two parties. 

4 A cashbox refers to a vehicle in which funds are raised without a clearly stated purpose for those funds at the time of raising. The idea is that investors trust the managers to make great investments when they arise. Cashboxes were banned on the ASX for a time. 

5 Its final composition was Allco Equity 35 per cent, Allco Financial 11 per cent, Macquarie and TPG just under 15 per cent apiece, Onex 9 per cent and some other foreign investment firms the remainder. 

6 The deal team briefly considered asking ASIC for an extension to the deadline, then decided there was little point. Margaret Jackson, Qantas’s chairman, would resign in late 2007 in light of the board’s support for the failed tilt. 

7 History tends to suggest that it was just as well the deal didn’t go through, given the global financial crisis that was just around the corner. Today, Yates is not so sure. ‘Would it have been a disaster? I don’t know. I think it’d be very challenging,’ he says. ‘But we did write a 10-year debt deal where APA didn’t have to pay any interest, and had almost no covenants, so they probably would have got through. 

I think AEP shareholders would have got toasted in the short term. But the debt deal probably would have saved it all.’ 

8 https://www.wesfarmers.com.au/docs/default-source/asx-announcements/wesfarmers-proposal-to-acquire-coles-group.pdf?sfvrsn=de7a98ba_0. Macquarie was reported to have bought up to 15 per cent in Coles in April 2007. https://www.ft.com/content/d72a64a8-e17d-11db-bd73-000b5df10621 

9 The AFR went for A$600 million but we believe the true figure to be lower. https://www.afr.com/companies/dyno-nobels-dynamite-float-20060407-jfmul and https://www.fnlondon.com/articles/macquarie-flips-dyno-nobel-in-seven-months-20060406

10 The Quadrant Energy deal involved Macquarie Capital, Brookfield Business Partners, Wesfarmers and others buying the company in 2015, then selling it to Santos for US$2.15 billion in 2018. It is considered a great example of Macquarie partnering with its clients and is discussed in Chapter 14. https://www.macquarie.com/au/en/about/news/2018/brookfield-business-partners-and-macquarie-announce-agreement-to-sell-quadrant-energy.html and https://www.macquarie.com/au/en/perspectives/spotlight-on-quadrant-energy.html

11 https://www.afr.com/companies/media-and-marketing/mine-case-shafts-macquarie-for-4m-20090217-jmm6l

12 The miners themselves then passed that debt on to Beaconsfield Gold, Allstate’s partner, in return for A$2.85 million of cash.

13 Macquarie denied this, but it’s really a question of nuance. The Alinta board said it would compensate Macquarie for all prior corporate advisory work, but that all mandates involving future work would end. Alinta also said Macquarie could only continue to advise former CEO Bob Browning and former chairman John Poynton on the buy-out proposal if they complied with a list of conditions, including returning Alinta company information. See Katrina Nicholas in the AFR here: https://www.afr.com/politics/alinta-dumps-macquarie-over-conflicts-20070117-jexat

14 https://www.smh.com.au/business/babcock-joins-alinta-stalkers-20070120-gdpaas.html

15 This article in The Age explains the intricacies of the first round of bids: https://www.theage.com.au/business/macquarie-and-the-market-may-still-have-a-say-over-alinta-20070331-ge4k9w.html

16 One interesting aside to this is a concern Macquarie had and how it played out. The AGL/Alinta relationship involved a process colloquially known as Russian roulette, through which any buyer of Alinta had to offer to sell its 67 per cent stake in its Western Australian retail and cogeneration assets to AGL, which held the other 33 per cent, at a price of its choice. AGL then had to buy the assets or sell its own stake to the other party at the same price. This was one reason Macquarie was unwilling to bid beyond a certain level because of the uncertainty around whether that agreement might be exercised. 

When Babcock & Brown won Alinta it split the assets up into different portfolios. ‘That was a bad decision,’ says Dunlop, ‘because the portfolio theory of Alinta was that all the bits relied on each other for the value equation.’ AGL then exercised its Russian roulette rights, creating strain for Babcock, which would go under in the global financial crisis. 

Dunlop says Babcocks called him and Vidgen for assistance. They did assist with the necessary restructuring, which ended up creating the entry vehicle for Brookfield, another infrastructure major, coming in to Australia, and the foundation of a good relationship between Macquarie and Brookfield which would play out later in the Quadrant Energy deal.

17 For a while, anyway; Babcock & Brown would go into voluntary administration in March 2009 having been wiped out by the global credit crunch, rendering the stock it paid Alinta worthless. Alinta itself was split into three businesses: Alinta, for a time known as WestNet Infrastructure Group and now Alinta Energy, retained the Western Australian gas retail business and was acquired by Hong Kong’s Chow Tai Fook Enterprises in 2017. WestNet Energy provides services to the owners of the AlintaGas Networks gas distribution centre in Western Australia and to the owners of Dampier to Bunbury. Alinta LGA, since renamed Jemena, manages infrastructure assets in Australia’s eastern states. Ownership then passed to Singapore Power International, who had been in the Babcock bidding consortium; in 2015 State Grid of China Corporation bought 60 per cent of the business.

18 https://www.afr.com/street-talk/macquarie-playing-all-sides-of-alinta-20100629-iua9l

19 Nicholas Moore, A$18.2 million; Bill Moss A$15.1 million; Ottmar Weiss A$11.5 million; Andrew Downe A$10.3 million.

20 Clarke got A$18.97 million, Michael Carapiet $22.9 million and Downe $21.5 million that year.

21 In 2008 Allan Moss earned A$24.755 million, Moore $26.751 million. Gail Burke, Michael Carapiet and Andrew Downe were the other top earners in the $14–19 million range.

22 See 2022 annual report pages 117 and 121. O’Kane’s total remuneration for FY2022 was A$36.223 million; Wikramanayake’s was A$25.82 million.

23 Also, he says, ‘we used to be conscious of the deals we didn’t do. It got messy where people were just rewarded for doing deals, because it means there’s no reward for not doing a deal, even if doing the deal turns out to be a total dog.’

24 The idea of the NOHC first appears in public records in July 2006. ‘This change would provide the bank with the flexibility to continue growing,’ the 2007 annual report says. ‘We currently operate under a banking regulatory model that does not readily accommodate our growth internationally and in non-banking business.’

25 Now, thanks to Brexit, a UK licence doesn’t provide a passport to anywhere in Europe, which is one reason Macquarie has staffed up heavily in Dublin and Paris. ‘There has been a big jump in four or five regional hubs with cross-group capabilities in Europe,’ says Stephen Moir, who heads communications for EMEA. Germany has always been important, and now Milan and Madrid are growing to critical mass too.  

26 The 2008 annual report says: ‘As a result of the restructure, Macquarie has greater flexibility to adapt to future business, market and regulatory changes.’

27 Another who might at one time have been considered a possible heir to the throne, Alastair Lucas, had lost out to Moore in the merger of their businesses back in 2001. Richard Sheppard, long Allan Moss’s deputy, had joined about the same time, was about the same age and not a long-term candidate; he instead became CEO of Macquarie Bank Limited under the new structure.

28 This figure is from 31 March 2019. After credit markets began to become difficult from August 2007, Macquarie then raised A$17 billion in the remainder of the financial year, and increased deposits by 30 per cent from A$10.2 billion to A$13.2 billion.

29 2008 annual report.