Macquarie Bank invests $10 billion into Europe

A new mega-infrastructure fund is to be launched by Macquarie Bank as it prepares a new assault into Europe and to meet a growing demand from continental pension funds for unlisted investment vehicles to warehouse their cash piles.

The success of two early funds in attracting investors has prompted the bank to unveil plans for Macquarie European Infrastructure Fund III, which is set to garner more than €5 billion in one of the bank's biggest fund-raising moves in the region.

Given the demand for both MEIF I and II, analysts expect that the third fund will be heavily oversubscribed and could top the combined 6.1 billion euros the first two raised. The next fund launch will unleash a further wave of acquisitions by the asset-hungry investment bank, which has used the proceeds of the first two vehicles to drive its ambitions throughout the European Union.

It also supports the belief of market watchers that Macquarie is poised to take advantage of the fall in asset prices prompted by the global credit crunch, which has also seen private-equity rivals virtually disappear from previously hotly contested bidding battles.

Among the companies that have come under the wing of MEIF I and II or have been snapped up through the funds' membership of consortium bidders are:

• The biggest water company in Britain, Thames Water;
  
• The high-speed rail line linking the Swedish capital, Stockholm, with Arlanda airport;
  
• Wind farms in France;
  
• Equity stakes in airports and gas and electricity distribution networks in Wales and the Netherlands;
  
• The ferry service between the British mainland and the Isle of Wight.

The investor profile of the new fund, likely to open for business before the end of this year, will be heavily skewed towards European backers and will continue the thrust of demand seen for MEIF II. Whereas Canadian, Australian, Singaporean and US investors made up the majority of investors of the first fund when it closed in July 2005, that all changed with the second vehicle.

Just over 80 per cent of its 4.6 billion euros was provided by European investment groups and wealthy German individuals as they jumped on the bandwagon of Macquarie's push into infrastructure asset market. All of the €1.5 billion raised by MEIF I has been fully committed, and it has taken just six months to spend 52 per cent MEIF II's cash pile.

It is expected that the third fund will remain open to investors for a year, although initial indications are that demand for it will be strong and it could close early. The head of Macquarie Group in Europe, Jim Craig, told analysts in a briefing on Friday that the new fund would be a long-term commitment by the bank and was not a "quick fundraising" vehicle.

The head of equities research at Deutsche Bank, Ross Brown, said the unveiling of the new fund indicated that the outlook for Macquarie was strong after it said its current half-year profits would top $A1 billion ($NZ1.18 billion) for the first time.

Source: Financial News
Date: 17.09.2007 [92]