Strong interest in SOE advisory role

Who's who of investment banking world seeking Treasury advisory role on SOE sell-downs

10th Jun 11, 2:28pm by Gareth Vaughan

By Gareth Vaughan

A proverbial who's who of the investment banking world have thrown their respective hats into the ring seeking the first advisory role advertised by Treasury ahead of the potential sell-down of government stakes in five state owned enterprises (SOEs) after November's election.

About 12 parties, some individual firms and others who have paired up, have expressed interest in becoming the commercial advisor, or advisors, to help Treasury with preliminary work on the proposed sell-downs prior to the November 26 general election, interest.co.nz understands.

These include Prime Minister John Key's former firm Merrill Lynch, which has teamed up with local firm, and long time South Canterbury Finance advisor, Forsyth Barr. Cameron Partners, whose founder Rob Cameron was head of corporate finance at Fay Richwhite where he played a key role in Telecom's privatisation and initial public offering in 1989 and 1990, has teamed up with its global alliance partner Rothschild.

Others to throw their hats in the ring are understood to include Morgan Stanley, JP Morgan, Citigroup, UBS, Goldman Sachs, Macquarie, First NZ Capital with its regular international partner Credit Suisse First Boston, Deutsche Bank which owns 49.9% of Craigs Investment Partners, Greenhill Caliburn, and Royal Bank of Scotland.

Proposals from the interested parties were due in by Wednesday and they're likely to hear whether they've been short-listed as soon as today. Those to make the short-list will then give presentations to Treasury officials next Tuesday and Wednesday, with negotiations with the preferred party, or parties, from next Friday June 17, and the start of any contract from the following Friday, June 24.

Treasury is separately seeking individuals to advise on specific aspects of the preliminary work, and will later this month start looking for yet more advisors, this time in the form of firms to do scoping studies on the SOEs.

Sales to raise up to NZ$7 billion

The National Party made its push for the so-called mixed ownership model for state owned power companies official in last month's Budget with the Government prepared to reduce its 100% stakes in Mighty River Power, Genesis, Meridian and Solid Energy to as low as 51%. The Government is also looking to sell-down its 76% stake in Air New Zealand.

The sell-downs, through sharemarket floats expected to give local investors a leg up over their international counterparts, would happen over a three to five year period starting in 2012. Treasury estimates implementation of this so-called mixed ownership model would free up between NZ$5 billion and NZ$7 billion of capital, to be put towards other areas of government spending. Ultimately, asset sales of such scale are likely to lead to tens of millions of dollars in advisors' fees to investment bankers and the big legal and accounting firms.

Touted as a way of boosting "ma and pa" retail investors' investment opportunities away from property and collapsed finance companies, the SOE floats are also seen as a way of kicking some life into a moribund domestic sharemarket whilst the Government still retains control of the companies.

Should the sell-downs - opposed by the opposition Labour Party - ultimately go ahead, there are likely to be further advisory/management mandates to actually float the companies on the sharemarket.

Fund manager and business commentator Brian Gaynor recently told interest.co.nz that he was worried Treasury might have "the wool pulled over its eyes" by investment banker advisors. Gaynor said it was important that local retail investors both got shares in any floats and incentives to keep them.

"There’s a huge conflict because if you’re an investment banker you’re normally connected with a broking arm (or firm) so you want a lot of shares traded. So it’s to your disadvantage to have incentives for people to hold the shares for a long time because that means the sharemarket trading tends to be less," Gaynor said. See full story here.

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4 Comments

by Plan B | 10th Jun 11, 10:07pm 1307700427

A Letter to Phil

Please try even harder than you are doing now. To me it looks like things are pretty tough. Our media has always bent to the will of the party in power and that combined with a right- wing bias make it doubly hard for you.

But ( and it is a big but)

John Key the former currency speculator wants to sell us down the road. And once he has done it it could be hard to stop.

My main concern is the Hydro Dams and keeping them as part of the Commonwealth of New Zealand

I like the term Commonwealth as it nicely sums up what these things really are- trouble is it sounds more like a third rate Olympics.

I think you need to show people what he wants to sell- He takes about companies and shares but really these dams are part of New Zealand. We built them into the very fabric of the land. Massive political will was spent to get people to agree to build them. People died to build them, the land was changed forever. Nothing like them will probably ever be built in New Zealand again.

Our parents and Grandparents did this. Our Children deserve this amazing renewable energy that costs so little to produce and provides so much.

This partial privatisation allows the market to take over, to dictate what happens in our own country.

We are over 1400 KM from our nearest big neighbour. We are on our own when it comes to things like electricity. We are not like Germany who if they get into a bit of bother can simply get electricity from Poland or France. We are really on our own. So we have to work together.

Show us pictures of the land, show that he is not just selling shares he is selling us, part of who we are. Something that we did together as a nation for the benefit of all and at great, personal, financial and environmental cost. You know how they work, sell things off that people do not understand, do not really value. He wants to sell off for private gain. Tell him that he does not have a mandate to do this. That if he does Labour collectively will pledge to repeal it when next in Government.

The worry I have is that New Zealanders seem to be sleep walking to servitude.

I hope your party understands that there is more at stake than who is going to get your job. You need to talk to the Maori Party. To The Greens, to everyone , you need to show that this is wrong.

I hope for our sake that you succeed

Kindest regards

Plan B

Ps If you need to you could actually point out that the idea doesn't work financially. And that once again National is looking for a socialist answer to a private interprize failure- Key talks about helping our financial markets and instead of telling the sharemarket to go out and do some work, the socialist in him says that the people of New Zealand have to hand over the keys.

You could also point out that the scum that are turning up from the corrupt financial institutions listed above will do and say anything to get there hands on the fees.

by KW John | 10th Jun 11, 11:45pm 1307706310

1998 -Sell Off Eventually

2011 -Sell Off Effortlessly

by Plan B | 12th Jun 11, 3:21am 1307805674

Just Say No

If someone turns up and wants to buy/sell/part exchange your local airport, botanic gardens or whatever, ask them to leave. Whatever the deal , we will ultimately loose. Don't ask me how, we just will, These people are very clever and their job , their only job is to separate us from our money. Sometimes they do this by dangling money in front of us. This has been known to confuse us. They know that with nice monopoly assets( ones that we have already built and paid for and no longer value) in their grasp they can keep us paying more and more for the very same assets again and again and again forever. It's brilliant. Except that it is not brilliant for us. It is very distracting from the real effort of paying our way in the world, so the simple answer is to send the word out that New Zealand is no longer for sale so please don't bother us any more.

Simple rules for confusing times.

1. If we Built it,we get to keep it

2. If someone want to buy something that is ours ask them to leave immediately ( politely of course)

3. Let an engineer run it( they will usually do a good job and we are good at producing them) - just don't pay them too much or they will start getting ideas

The infrastructure of New Zealand is not something to be bought sold and traded at a the whim of the latest politician , think tank or merchant bank it is the sum of the efforts of all New Zealanders for over 150, years do not not let anyone else have it no ,matter how nice they are.

Why because we already own it, we have already paid for it, it is ours, already. Stop giving it away all the time.

Why Everyone Loves Infrastructure Assets.

1. They are usually simple,easy to run businesses

2. People need what they do

3. They are usually monopolies

4. You only have to revalue them on a regular basis so that you can get away with charging whatever you like

5. People don't value them very highly so they are simple to take if you have pliant politicians.

Paying for new infrastructure.

If we want it , we have to pay for it. There that was simple wasn't it. There is no need for complicated Public Private Partnerships. A simple Local or central government bond issue would do the trick.

Stop Listening

Stop listening to the Bankers, the Boston Consulting Group. Oh and the McKinsey Consultancy and all the rest of them. And start thinking for ourselves.

ask anyone who has had anything to do with them ( and importantly who is not on the payroll either directly or indirectly) and they will tell you to keep them out at all costs. Why , look who they work for, They work for large organisations with lots of money. There job is to take as much of that money for themselves as they can get away with . That is it they have no other job. They are not here to help us, to save us, to make us better people. Their job is to help themselves. Oh and they don't know anything in particular that would be in anyway useful to help you achieve whatever it is that you want to do. And while they are around they are very distracting from the real business of making money

by janesimpson | 19th Jan 12, 8:01pm 1326956504

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