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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