Monday, October 17, 2005

Under the Influence: Pub takeover and Australian toll boycott give Macquarie a Hangover

Takeover talk hits Macquarie shares

October 17, 2005
The Age, (Australia)
Copyright 2005

Shares in Macquarie Bank Ltd reversed sharply on Monday amid reports that it is making a takeover bid for British pub operator Spirit Group.

But one analyst believed the share price fall could be linked to concerns about the sustainability of Macquarie's road toll model in light of the boycott by Sydney motorists of the new Cross City Tunnel.

Spirit owns and operates 2,000 pubs in the United Kingdom and last month sold 178 of its city pubs and bars to Tattersall Castle Group for STG177 million ($A426.7 million).

A London newspaper said Macquarie approached Spirit last week over a possible deal.

The newspaper said Spirit, which is owned by private equity groups Texas Pacific, Blackstone and CVC Capital and investment bank Merrill Lynch, is valued at around STG3 billion ($A7.2 billion).

A Macquarie spokesman said the bank would not comment on market speculation.

Macquarie shares fell 4.5 per cent or $2.95 to $62.75.

One analyst, who did not wanted to be named, said the fall in the bank's share price could be associated with Macquarie's toll roads, sparked by Sydney motorists avoiding the Cross City Tunnel which is operated by CrossCity Motorway.

"The profitability of the road does not look like meeting (CrossCity Motorway's) initial expectations and that could be rubbing off on Macquarie," the analyst said.

Macquarie has more than a dozen specialist funds investing in assets around the world such as airports and shopping centres, and although it is not involved in the Cross City Tunnel, it does operate Sydney's Eastern Distributor and M2 Motorway.

The operator of the tunnel, which links Sydney's eastern suburbs with Darling Harbour, has declared drivers can use the route free for three weeks from October 24.

"The private providers of the Cross City Tunnel are giving an unexpected concession to motorists to encourage them to use the tunnel," the analyst said.

But the analyst said the size of a potential Spirit takeover could be causing some nervousness amongst investors.

"I don't know if people are worried about the size of this potential acquisition of Spirit but I do know there has been a total absence of detail about it," the analyst said.

Copyright © 2005. The Age Company Ltd.