Of course an independent expert would find that Macquarie Airports’ planned $345 million payment to its parent Macquarie Group to internalise its management is "fair and reasonable".
Why else would a report be commissioned?
So now MAp independent directors have given their backing to the proposal to take over management rights, ahead of a shareholder vote later this month.
KPMG, which was appointed by MAp to assess the plan, concluded the value of the airport operator’s management rights was in the range of $320.6 million to $400.6 million.
Map shares ended up 4 cents at $2.45 yesterday, 15 cents above the proposed $2.30 a security valuation in the deal suggested by a MAp issue.
Macquarie Airports (MAp) announced on July 24 that it had reached agreement with Macquarie Capital (Macquarie) to internalise the management of MAp, subject to MAp security holder approval.
On August 28, it was announced that the proposal would be funded via a 1 for 11 non-renounceable pro-rata entitlement offer to eligible MAp security holders at $2.30 per stapled security, raising a maximum of $356m.
The payment to Macquarie in return for ending the management rights is $345 million.
As part of its finding KPMG noted the internalisation represents a significant change in the business model for MAp at a time when the external management model has fallen out of favour with investors.
By approving the internalisation, MAp shareholders "will be exchanging a variable payment, based on the Map security price and its relative performance…for a more certain payment reflecting salary costs and other operational costs," KPMG said in its report.
It also found the internalisation of management rights should reduce the volatility in Macquarie Airport’s earnings as well as provide scale benefits if the airport operator expands through acquisitions.
"In our opinion the internalisation is fair and reasonable," KPMG said in its report.
"Having regard to the above factors, we have determined the fair value of the Management Arrangements less any incremental costs to be incurred by MAp to be in the range of $320.6 million and $400.6 million The proposed internalisation price of $345 million will be paid out of MAp’s reserves."
"As we have concluded that the Consideration of $345 million is within the range of values we have ascribed to the Management Arrangements, we are of the opinion that the Internalisation is fair from the perspective of the non-associated Securityholders," KPMG said in the report’s summary.
However the airport operator will undertake a capital raising to help bolster its balance sheet.
Under the raising MAp will launch a one for 11 non-renounceable pro-rata entitlement offer to existing investors at $2.30 per security, raising a maximum $356 million.
The chairman of MAp’s independent board committee Trevor Gerber said the internalisation proposal is the next logical step in a process by the airport operator to address the gap between the value of its airport investments and the security price.
"MAp has reached a stage in its evolution where it makes sense to become a standalone entity," Mr Gerber said.
