Treasury seeks 'independent advisor' for National's SOE selldown plans as 4 firms work on scoping studies

Treasury seeks 'independent advisor' for National's SOE selldown plans as 4 firms work on scoping studies

By Gareth Vaughan

Treasury, which already has investment bankers from six firms beavering away in advisory roles on the National Party's plans to float stakes in four state owned enterprises on the sharemarket, is now looking for another advisor, or advisors, this time to provide independent advice on the sales.

The laying of the groundwork for the potential sell-downs comes with the November 26 general election, where National will seek a mandate for the sales, still the best part of three months away. And further advisory roles are still to come with the actual sales syndicates for each float. Total fees paid to the advisers are likely to be worth tens of millions of dollars based on the predicted NZ$5 billion to NZ$7 billion the sell-downs will raise.

Treasury named Deutsche Bank and its 49.9% owned Craigs Investment Partners as advisers in July on preparatory work it's doing ahead of the potential sell-downs. Since then it has appointed four further firms to do scoping studies on the four firms National proposes to sell stakes in.

Interest.co.nz understands this has UBS working on Solid Energy, Macquarie on Mighty River Power, Goldman Sachs on Genesis Energy and First NZ Capital on Meridian Energy.

'Independent advisor' sought

Treasury is now seeking applications for the role of independent advisor. The firm, or firms, appointed to this role will provide counsel in areas such as the design of and participation in the pre-qualification process for the joint lead managers of the floats and appointment of sales syndicates, "independent quality assurance" of the sales programme advice prepared by  Deutsche Bank and Craigs Investment Partners, and independent advisory services during the consultation and execution phase for each transaction.

The government instructed Treasury in January to conduct preparatory work to enable partial sales of Mighty River, Meridian, Genesis, and Solid Energy and to reduce the Crown’s 74.69% shareholding in Air New Zealand, with the Crown retaining a majority stake in all the companies. The issue of partial SOE sales is shaping as a key election issue,  with National pledging to push ahead with the sales should it be re-elected and the Labour Party strongly opposing National's plan.

Any SOE 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.

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.

Aside from the expected National election victory, the timing and composition of the sell-down programme will depend on market conditions and the outcome of the scoping studies.

Deutsche & Craigs may be in sales syndicates

Treasury says Deutsche and Craigs haven't been precluded from applying for roles in the sales process itself. Therefore, Treasury needs independent advice on future stages in the project. Treasury will pick one or more independent advisors to advise it on each part of the process.

"The Treasury intends to pre-qualify potential parties for involvement in the sales process before the first transaction, and later appoint sales syndicate members for each transaction from this pool of qualified parties," Treasury says. "The Independent Advisor will have a primary role in the design of the pre-qualification process, and an assisting role in the selection of candidates."

"This is an advisory role where the Independent Advisor will liaise with the Crown Advisor (Deutsche and Craigs) in a review and oversight function."

The role will include providing an independent review of the management of the sale programme by Deutsche and Craigs and the Treasury, review valuation updates from the joint lead managers during initial public offering preparations, advise on certain agreements including offer management agreements, underwriting, and over-allotment agreements, advise on pricing and allocation including price setting and the tactics used to manage sales syndicates during book building.

Deutsche and Craigs will be providing the primary advice in these areas with the independent advisor(s) performing a second opinion oversight role, Treasury says. However, in transactions where Deutsche and Craigs are part of a sales syndicate the independent adviser will review the offer structure advice prepared by the joint lead managers, and advise on pricing and allocation.

A proverbial who's who of the investment banking world have so far thrown their hats in the ring for the SOE sell-down gigs. At least 12 parties, some individual firms and others who paired up, expressed interest in the role secured by Deutsche and Craigs.

Applicants seeking the independent advisory role must submit their proposal to Treasury by noon on September 26, with negotiations with preferred respondents due to kick off on October 7 and the contract starting on October 15.

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Well it’s very important, of course, that advisors advise on the advice of the advisors. Now if this didn’t happen, this would fall far short of the standards of a proper bureaucracy, which would clearly be intolerable. Without advisors advising on the advice of the advisors, the advice advised could advise advisors entirely inappropriately, which itself would be very poor advice. So advisor’s advising on the advice is advisable, as Sir Humphrey himself would no doubt point out. After all it certainly wouldn’t do to leave the Minister in an awkward and uninformed position, without the full and proper advice.

David B

You made me laugh out loud this morning or LOL as the youngsters might say.

Sir Humphrey would be proud.

cheers

Bernard

 Yes, David makes us laugh a lot –  amusing - he’s is a real asset and simply a good victim for a joke - good on you David.

:) I had a good laugh writing it too. It was Gareth's headline that set me off, I could see Sir Humphrey all over it!

 " the role of independent advisor".......where do I get an application form...does it pay well....must I get a brown nose....who will advise Treasury on this task of selecting an independent advisor.....DB is right...this is serious stuff....there really needs to be an advisory committee established to advise Treasury on whom to appoint to provide advice to Treasury on whom to appoint as the Independent Advisor.....is that too many whoms!

Meanwhile, Telecom's demerger comes with transaction costs of between $85 million and $120 million. So it's unlikely their plethora of legal, accounting, banker and investment banker advisors, plus "independent report" writers Grant Samuel, will be going hungry.

They might get together and use their fees to fund a new telecom company to compete with whatever they advised be set up...! I'm betting on a Tele pathic com tech company being the next big thing...no cellphone required ...just pay the fees and tele pathic com all you want....extra fees for tolls of course.

The National Socialists nationalised the Auckland waterfront yesterday, and most commentators only seemed worried about the drinking age rather than the (lack of) constitutional arrangements we have to constrain the State in any way. Today the National Socialists, despite supposedly believing in limited government, yet borrowing over $300 million a week, still bought a wetland somewhere. Why would anyone be suprised about bureaucracy to run the bureaucracy, or that this government continues to grow the number of government bodies?

As taxpayers politicians probably technically broke us from the day after the birth of the welfare state and yet they spend and spend and spend and all the Big Kahuna can come up with is taxing absolutely everything. One day, after I'm long gone, unfortunately, we'll figure out the politicians are the problem, and our social(alist democracy).

#stuffed.

Tribeless is a Jaffa....they didn't just drop the ball Tribeless...they punctured the thing as well...bloody useless....get out of the way...Wellington is coming to run the show...Harrrrrrrrrhahahaaahahaa

You'll see from my blog header, Tribelss is not a jaffa, Wolly. Indeed, only ever been there twice in my life.

Fair enuff..are you suggesting the auckland local pollies are somehow different to national pollies....they all stink Tribeless....

Oh yes. Full agreement. The point of that link is we don't need either local or central politicians. Indeed, our freedom depends on not having them. Just a constitutional minarchy.

Treasury has short listed Rothschild, Gresham and Lazard for the independent advisor role, according to the Australian Financial Review. Not sure any of them has anyone on the ground in NZ.