Investment bank Barrenjoey is reportedly considering a move into New Zealand, with the group said to have been making job approaches to investment bankers across the Tasman.
Barrenjoey was launched in 2020 by a raft of high-profile former UBS investment bankers, including former country head Matthew Grounds and executive Guy Fowler, and sources say it has been looking to open an office in New Zealand.
Recently, Barrenjoey has won several mandates in New Zealand, including the role selling Vodafone New Zealand’s telecommunication towers for Infratil and Brookfield and floating the Carter Holt Harvey business – recently renamed Business Supplies Group – for Graeme Hart’s private investment company The Rank Group.
The New Zealand investment banking market is dominated by a handful of domestic players including Jarden and Forsyth Barr and also Goldman Sachs.
The expansion plans come after a big year for Barrenjoey in 2021, when it found itself on some of the country’s largest mergers and acquisition transactions, including the Sydney Airport and Ausnet privatisations and Seven Group’s takeover of Boral.
However, the group has been moving to distance itself from its 40 per cent shareholder Magellan Financial, which has suffered large fund outflows following the controversial departure of executive chairman Hamish Douglass and chief executive Brett Cairns.
Barrenjoey’s management team publicly dismissed speculation that its staff were rewarded with Magellan shares, after the company’s share price has cratered since 2020.
Barrenjoey has also dismissed suggestions it has been searching for a party to replace Magellan as its minority holder.
British bank Barclays, a 10 per cent shareholder, is not keen to buy out Magellan, but one possibility raised in the market is a move by management to increase its holding further.
Yet this would probably happen when the group has moved further into profitability, say market observers.
For the year to the end of June, Barrenjoey lost $114.1m, largely related to staff costs, but it has been profitable for the six months to the end of December.
Magellan contributed about $90m of cash towards the launch of Barrenjoey and about 1.2 million Magellan shares, which in September 2020 would have been worth about $66m.
Magellan and Barclays seeded the business with $200m of the capital, and the end game was expected to be one in which Magellan would eventually buy the business in full.
However, since September 2020, when Magellan shares were about $55, they have fallen dramatically to about $16, with its market value at about $3bn.
Magellan is understood to be not committing further funds towards Barrenjoey, so if the advisory firm wants to grow further and expand into new markets, finding a more supportive shareholder makes sense.
One option is a major global funds management firm or an offshore investment bank buys the firm, although Barrenjoey has branded itself since its launch as an Australian champion.
Barrenjoey has been in the spotlight over the past year as its competitors question whether it can cover its costs from hiring top talent in the market.
Typically, investment banks take some time before they start generating a profit due to the huge start-up costs.
Top investment bankers in the Australian market have been drawn to the firm, which has about 300 staff in Sydney, Melbourne and Perth.
They have the opportunity to have more control over their own destiny and are less at the mercy of their head offices in the US or Europe, which can often cut their pay packets because of offshore issues and put in place restrictions for executing on transactions due to heavy regulatory requirements.
Barrenjoey’s divisions include corporate finance, equities, fixed income and research and it has plans to offer fixed-income bonds, equity financing and research across 200 stocks by the end of the year.
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