Magellan takes major stake in Guy Fowler’s Barrenjoey Capital Partners

Guy Fowler’s new investment and advisory group Barrenjoey says it’s not “niche or boutique”, as Magellan takes a cornerstone stake.

Gary Weiss (left) and Guy Fowler at the Sohn Hearts and Minds Investment Conference at Haymer Hall in Melbourne in 2018. Picture: David Geraghty

The nation’s newest investment bank, Barrenjoey Capital Partners, looks set to make a string of new hires over the coming months lured by the offer of equity in the firm and the backing of funds management powerhouse Magellan Financial Group and British banking giant Barclays, which have seeded it with more than $200m of capital.

After almost a year of speculation it was announced on Monday that Magellan was taking a cornerstone 40 per cent stake in the new investment and advisory group, with former UBS banker Guy Fowler to be executive chairman and former Challenger Financial Group boss Brian Benari to be CEO.

While Mr Benari and Magellan chief executive Brett Cairns – who will be a director of the new group – said there were no plans for former UBS Australia boss Matthew Grounds to join given commitments he has made to his former employer, Mr Grounds is expected to join the venture by the time it is fully operational by mid-next year.

His non-compete with UBS expires in the new year.

“Matthew has got commitments he has made to UBS, his former employer. We have been working away on that. There is nothing here that Matthew is looking at that doesn’t honour those commitments,’’ Mr Cairns said.

An independent chairman for the group is still to be named, although The Australian’s DataRoom column on Monday said David Gonski was in line for the role.

Other big names in the venture are ex-Deutsche Bank chief financial officer John Cincotta, ex-UBS investment banker Matt Hanning and ex-UBS head of equities Chris Williams.

Ex-Barclays country head Cynthia Whelan will be a senior adviser and BHP chairman Ken MacKenzie will be a senior strategy partner.

It comes amid a flurry of activity in the local investment banking and corporate advisory sector over the past year, including moves into the local market by New Zealand investment bank Jarden and US investment bank Jefferies, which raided CLSA last year.

Former PwC chief executive Luke Sayers has also recently launched a new investment venture known as “Sayers”, which has hired a string of former PwC and JB Were executives.

Magellan will provide $90 million cash, as well as 1.2 million shares in exchange for 40 per cent economic stake in Barrenjoey and a 4.99 per cent voting interest. Barclays has committed $45 million for a 9.99 per cent economic stake and 4.99 per cent voting interest.

The remaining 50 per cent will be owned by the staff.

Barrenjoey will provide corporate and strategic advisory, equity and debt capital market underwritings, cash equities, research, prime brokerage as well as traditional fixed income services to Australian and international clients.

“This will be a true, local global investment bank. Don’t think niche or boutique, think Macquarie-esque,’’ Mr Benari said.

“What this isn’t is a little, nimble boutique. In many ways it is a start up but in many ways it is more akin to a JV between one of the worlds biggest banks and one of the nation’s biggest fund managers and a local team of talented people. A diversified, full service business.”

Mr Cairns says the idea for came from an impromptu conversation in his office with his chairman Hamish Douglass several years ago.

“He came to me and sat in my office and we started to kick around the idea. Looking at the lessons we have learned out of the Magellan journey,’’ Mr Cairns told The Australian on Monday.

“We thought there could be something here. We started to make a few phone calls.”

Magellan shares closed 3.4 per cent lower on Monday at $54.99 as Macquarie’s Brendan Carrig says the new venture carried a “high degree of risk and uncertainty in a highly competitive business”.

“Should Barrenjoey not gain the required leveI of traction across the Australian client base within 18-24 months, success without further investment will likely be hard to come by,’’ he told clients.

Asked if the new venture could provide a distraction for Magellan, Mr Cairns replied: “That is the concern Hamish and I address every time we think about this.”

Both held a town hall meeting with Magellan staff on Monday morning, where Mr Douglass took questions.

“This is a principal investment for us. We expect to make a handsome return over the journey,’’ said Mr Cairns.

“We have no day to day involvement – it is a completely stand alone business and that is the high watermark for us. No it is not going to distract us and that is the intention.”

He said the new group would be open to partnerships and co-investment with Magellan. It could also utilise Magellan’s research team and other capabilities.

Barclays President and CEO Paul Compton said the bank had been talking with Magellan about the venture for nine months.

“We have been talking about how we might be able to bring this together and the role that B might play in the structure,’’ he said.

“We have been looking to accelerate our growth in Australia. We see Australia as a very attractive and important market for Barclays. Speaking to Magellan and understanding the structure they were putting in place, it looked like a terrific opportunity for us. We see this as a great opportunity for our clients to access the Australian market and capitalise on cross border flows.”

The Corporate Finance business of Barrenjoey will be operational in October 2020, and the Markets business is expected to be fully operational in the middle of 2021. Barrenjoey’s offices are located at Liberty Place, 161 Castlereagh Street Sydney.

“We have 60 people working away putting in place all that infrastructure,’’ Mr Benari said.

“The model already has demonstrated the capacity to attract incredibly capable people. It is a real broad base – we have pulled people from Macquarie and the global investment banks as well as the domestic banks.”