Mac joins IFM, QIC to bid for Ausgrid stake

Australian investment banking powerhouse Macquarie Group is believed to be joining forces with IFM and the Queensland Investment Corporation to bid for a $10 billion majority stake in the NSW government’s electricity distributor Ausgrid.

A revised sale process is being launched for the state-owned power company.

It will start in about four weeks through investment banks UBS and Deutsche.

This comes after Chinese bidders State Grid and Cheung Kong Infrastructure were blocked from buying a 99-year lease over a 50.4 per cent interest for at least $10 billion in a process that was recently shelved due to the federal government’s objection to the possible transaction.

Treasurer Scott Morrison indicated that a transaction involving one of the parties would not have been in the national interest due to security concerns.

It comes after DataRoom revealed last week that a request for proposals was being called for a dual-track process for Endeavour Energy, ahead of a potential $3 billion-plus initial public offering of the NSW state-owned entity on the Australian Securities Exchange.

It is now understood that the government, rather than the advisers, called for the RFPs.

It is also understood that they extended to roles for groups working around the current investment banks, such as legal and accounting firms like Deloitte and Ernst and Young.

While Deutsche and UBS will no doubt be fighting hard to handle any Endeavour IPO as a duo, it could still be the case that at least one other investment bank is drafted into the frame as a joint lead manager or co-lead manager. This could also open up other opportunities for smaller brokers, such as Morgans, which could handle the retail side of any deal.

With respect to Ausgrid, it is understood that only the Macquarie-backed consortium is so far vying for the asset.

The rules surrounding foreign ownership are still largely unclear.

Macquarie Capital advised State Grid in the last contest, which came to a head as a two-horse race with CKI, advised by Credit Suisse, as local parties shied away due to their competitive cost of capital.

It will be interesting to see what sort of price an Australian-only consortium would be willing to pay for the entity.

Meanwhile, moves to bring in advisers for a prospective float of Endeavour Energy could mean that some of the financial and legal firms that would be logical candidates to work on a deal would face a dilemma as to whether they opt for a joint lead manager role on a possible float or choose to advise a prospective bidder for Endeavour.

The latest decision is likely to upset some investment banking advisers, nervous about signing up to work for a prospective bidder with the risk of losing out on the deal should the government opt to secure a sharemarket listing.

Meanwhile, final bids for the $6 billion-plus Port of Melbourne are expected to be lodged mid-September in the process run by Morgan Stanley and Flagstaff.

The two final parties that remain in the contest are said to be QIC with Borealis, lined up against an IFM-Macquarie combination, after China Merchants fell away from the pack.