Barrenjoey launch to spur banker merry-go-round

The next moves of senior investment bankers around the Australian market is becoming a growing topic of conversation

The next moves of senior investment bankers around the Australian market is becoming a growing topic of conversation after Magellan Financial Group on Monday confirmed it was funding a new industry start-up headed by former UBS operative Guy Fowler.

Outgoing ANZ boardroom head David Gonski — one of the country’s most well-connected businessmen — is believed to be in line to take the role of independent chairman, as first flagged online by DataRoom on Monday.

Meanwhile, Matthew Grounds, who previously ran UBS in Australia, is expected to soon join what is to be called Barrenjoey Capital Partners when his non-compete period with the Swiss bank ends.

Mr Gonski is known to have a close relationship with Mr Grounds and Mr Fowler that dates back some time, with all three having close links to Westfield co-founder and former chairman Frank Lowy.

Other investment bankers are expected to be hired next year after they have been paid their annual bonuses at their current employers.

The top talent is being closely watched at UBS, with infrastructure banker Jarrod Key being one name that comes up in conversation, while George Kanaan, who dominates block trades in Australia, is also expected to jump ship from Mr Grounds’ and Mr Fowler’s former employer.

Others suggested as possible candidates to join Barrenjoey include the head of Financial Institutions Groups Shane Doyle, long-time UBS banker Geoff Davis and managing directors Kelvin Barry and Luke Bentvelzen.

UBS industrial banker Greg Peirce is believed to have been approached for the venture, although he is known to be returning to Australia from Hong Kong to run the local investment banking operations for UBS. Yet it is possible he could still eventually join Barrenjoey.

The other investment banking start-up is the Australian operations of Jarden, which has been raiding the UBS ranks recently and is said to have plans to hire more industry experts.

Whether more staff leave UBS will no doubt depend on compensation, with Barrenjoey offering staff a share of up to 50 per cent of the equity in the firm, and with there being only so much to go around.

While former Deutsche Bank Australia boss Michael Ormaechea has been suggested as a candidate to work at Barrenjoey, it is understood he will not be among those who join.

Some say the situation could have striking similarities to when Bankers Trust was the dominant player in the investment banking arena before UBS took the lead position when that bank was broken up and many of its top staff joined the Swiss rival.

Yet despite high-profile bankers joining Barrenjoey, many still question how successful the venture will initially be, given that starting up a fully functioning investment bank in the Australian market is seen as a costly exercise with little payback for a number of years.

The opportunity for Barrenjoey will be if it adds asset management to its offering — a particularly lucrative area of business for local rival Macquarie Group.

Much of how the new operation takes shape will not be known until around the middle of next year, when the next venture is fully operational.

So far, Barrenjoey consists of former UBS investment banker Mr Fowler, executive chairman, former Challenger boss Brian Benari, chief executive, and former Deutsche Bank Australia deputy CEO John Cincotta, and former UBS operatives Matt Hanning and Chris Williams as founding partners.

BHP chairman Ken MacKenzie will be Barrenjoey’s senior strategy partner, while former Barclays Australia chief executive Cynthia Whelan will join as a strategic adviser.

British bank Barclays has entered into a co-operation agreement with Barrenjoey to offer all its investment banking services, including balance sheet funding.

Magellan, chaired by Hamish Douglass, will offer $90m in cash and 1.2 million Magellan shares to buy a 40 per cent stake in Barrenjoey, in a deal that puts Barrenjoey’s value at $450m. It will also provide a $50m working capital facility.

Barclays will put forward $45m to gain a 9.99 per cent interest.

The new venture will offer traditional corporate advisory transaction services, including equity capital markets, debt capital markets and leveraged finance solutions and a number of investment bankers around the market are understood to have been targeted for a role.

While Barrenjoey is unlikely to be a threat to major US-based investment banks such as Bank of America, Citi and JPMorgan, which provide large amounts of balance sheet funding to clients, it is likely to prove an upset for others in the market such as Jefferies, Credit Suisse and UBS.