Macquarie locks in Qube bid as another giant gets set to leave the ASX
Bevan took charge just last Thursday and this could very well be one of the shortest chair successions in ASX history after signing an agreed takeover on behalf of Qube three days later.
Of course, Bevan, the former long-serving BlueScope Steel chair, knew exactly what was coming after he joined the Qube board as a director at the start of this year with an eye to become chair. (He took over from Allan Davies who stepped down after eight years).
As my colleague Bridget Carter writes, Qube and its bankers have been holding talks for two months with Macquarie, where they squeezed a $400m bump from MAM and getting the board over the line. This underscores Macquarie’s conviction in Qube.
Another recent Qube board recruit, Mick McCormack knows how deals this size can unravel. He was a critical member of the Origin board involved in the drawn-out $18bn takeover from Brookfield, that was ultimately thwarted by key shareholder AustralianSuper.
This time UniSuper holds 5.25 per cent of Qube, the Challenger-backed Greencape Capital has just over 5 per cent.
For Macquarie, the move on Qube shows it’s not all data centres and digital infrastructure, with traditional infrastructure still very much on its radar. Macquarie has form in ports through a string of acquisitions in New York and New Jersey. Shortly before the Covid pandemic, it acquired the Long Beach Container Terminal in California.
As a long-term investor, Macquarie sees plenty of upsides. The Hong Kong-based Way has previously told investors about AI technology bringing new and substantial productivity benefits in running old world infrastructure. It’s an operational value-add strategy.
Sharper scheduling and streamlining operations could deliver higher throughput and slash truck and rail waiting times, which are one of the biggest leakages of value. Macquarie will run an exclusivity period until 1 February next year, by which time both sides anticipate the fund manager will stick to its $5.20 offer price – or higher.
The proposal represents a 28 per cent premium to the last closing share price of Qube. It assumes an implied price to earnings multiple of approximately 14.4 times.
After stripping out Qube’s 50 per cent stake in Patrick it owns jointly with Brookfield (the ports operator was recently valued at $7bn on a 100 per cent), the offer delivers a much larger premium of just over 45 per cent. Including debt, the enterprise value is $11.6bn. This suggests the market may have significantly undervalued Qube’s core operations covering road and rail transport, warehousing and distribution.
If the deal moves ahead, there are structural implications for Australian capital markets.
Qube represents further hollowing out of the ASX’s middle, with quality infrastructure increasingly moving into private markets. Remember, Macquarie manages funds on behalf of long-term investors, a classic private markets play.
In recent years the likes of Afterpay, AusNet, Blackmores, Boral, CSR, Crown, Newcrest, Oz Minerals and Sydney Airport have left the ASX.
Apart from the return of Virgin, there has been very little replenishment of public capital markets at scale – an issue that has begun to exercise the likes of ASIC chairman Joe Longo, who sees healthy and deep public capital markets as vital for the economy, as well as having better visibility of companies.
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Ben Way’s Macquarie Asset Management didn’t want new Qube chairman John Bevan to get too settled in before coming back with the $9.2bn bid ($11.6bn with debt) for the ports and logistics operator.