Fickle market weighs on NAB spin-off vote

NAB

It’s less than three weeks before National Australia Bank investors sit down in Melbourne to vote on the historic spin-off of troublesome British subsidiary Clydesdale Bank.

While the board and management have done their best to sell the deal to shareholders, equity markets are not playing along and have tanked since bankers and fundies toasted in the new year.

Today, proxy advisory house ISS will finalise its views on the transaction, which will give NAB shareholders 75 per cent of Clydesdale, or one security for every four NAB shares they own.

The plan is to sell the remaining 25 per cent, or 219,828,814 shares, via an IPO, with pricing to be revealed on February 2 and trading in London and on the ASX to instantly follow.

While shareholders are voting somewhat blindly on the deal on January 27 before the IPO pricing, NAB boss Andrew Thorburn is determined to get the deal through and has shown in previous asset sales he can cop a blow to do so.

If investors price the bank at 0.75 times Clydesdale’s $5.9 billion book value, NAB will wear a $3.2bn accounting loss.

A worse result at 0.5 times book value would result in a bigger $4.7bn one-off hit to statutory profit.

Yet along with shaky stockmarkets, the looming reports from the proxy houses — CGI Glass Lewis also has one on the way — may be making the NAB board more nervous, particularly after Westpac was publicly taken to task by Ownership Matters over its ­decision to exclude a capitalised software writedown from bonus calculations.

ISS has already raised eyebrows over extra payments to board members Ken Henry, David Armstrong and David Gilbert for serving on a due diligence committee overseeing the Clydesdale deal.

Ahead of NAB’s annual meeting last month, ISS labelled it “concerning” that additional fees were paid for “what could be described as something which ordinarily falls within a directors role”.

They’re not alone, with broker Credit Suisse also describing the Clydesdale deal “expensive” at up to $500m all up.

Lead advisers Macquarie and Morgan Stanley will be paid $19m and £15m ($31m), respectively, according to the scheme booklet.