Macquarie gets clearance for airport sell-off

MACQUARIE Group has received the green light to change its constitution and spin off its $1.3 billion stake in Sydney Airport.

MACQUARIE Group is free to offload more equity investments to shareholders after getting the green light to change its constitution and spin off its $1.3 billion stake in Sydney Airport.

At a meeting in Sydney yesterday, Macquarie shareholders overwhelmingly approved the in-specie distribution of its stake in the listed airport. Shareholders will receive one stapled security in Sydney Airport for each Macquarie share.

Macquarie will book a gain based on the closing Sydney Airport price on January 10, the last trading day prior to the distribution. But the share price has fallen since Macquarie unveiled the planned in-specie distribution, which would eat into its windfall.

Based on the price of $3.84 on Tuesday, Macquarie would make a gain of $265 million, down from the $377m it would have realised when the plan was announced last month. After opting against selling its holding by other means in recent years, chairman Kevin McCann yesterday reiterated that the in-specie distribution was an equitable way to distribute Sydney Airport to shareholders so they could participate directly in the infrastructure asset.

It is also expected to increase return on shareholders' equity, which has slumped since the global financial crisis.

But some analysts have expressed concerns about the cost of the deal, with a large slice of the gain Macquarie generates likely to end up in the investment bank's staff bonus pool. UBS analysts also questioned the change to Macquarie's constitution to facilitate the deal, which was approved by shareholders yesterday.

At the end of September, Macquarie had $5.5bn of equity investments and UBS's Jonathan Mott said the investment bank could use shareholders to exit "less attractive and less liquid assets" than Sydney Airport in the future.

The airport distribution will be split between a capital return and a special dividend, 69 per cent and 31 per cent respectively. The dividend is 40 per cent franked.

Macquarie also won approval yesterday for a share consolidation on a 0.9438-for-one basis to adjust for the capital reduction following the deal.

The distributions will add about 102,000 new shareholders to the Sydney Airport register, more than trebling the shareholder base.

Macquarie's decision to distribute the shares also follows a major overhaul of the airport's capital structure, driven by the Australian Taxation Office. Sydney Airport agreed to replace billions of high-priced hybrid capital from its $6.5bn borrowings to settle concerns about deductions claimed against the interest paid.

The airport also agreed to pay primary tax of $69m to settle the ATO's concerns. But the restructure has reduced the appeal of the stock to foreign investors, who now receive distributions after tax and cannot claim franking credits available to domestic investors.

Macquarie Group bought the airport from the federal government in 2002 for $6.5bn and it reaped tens of millions of dollars in management and transaction fees as manager of what was a satellite fund until 2009.