You don’t necessarily sell your farm to finance building a road that won’t produce revenue leading back to the very same farm that is now not yours unless times are extremely hard. This compromise of Australian national security is likely a good buying opportunity for the Chinese who would love to purchase more influence in Oceana. The implications of this will span generations — all for a short-term gain.
Australian Prime Minister Tony Abbott is turning out to be an investment banker’s best friend.
His center-right government is in the midst of an unprecedented push to build public infrastructure — and to finance the program, regional authorities are busy selling off state assets, creating a boon for bankers just as Australian corporate mergers and acquisitions slow. Banks including Macquarie Group Ltd., Morgan Stanley and UBS AG have been hired to sell everything from ports to electricity grids, data compiled by Bloomberg show.
Advisory fees from the biggest asset sales may reach about $100 million, almost triple the total haul for government-related work last year, estimates Jeffrey Nassof, an analyst at New York-based Freeman & Co.
“The amount of government work that is under way or proposed is without precedent in this market,” said Roger Feletto, co-head of advisory firm Greenhill & Co.’s Australian unit in Sydney. “The focus on seeking roles on those government processes is understandable and it’s pretty competitive.”
Abbott came to power in September 2013, saying he wanted to be “the infrastructure prime minister.” Treasurer Joe Hockey has described the push as the biggest since the construction of the Snowy Mountains hydroelectricity project, which began in 1949 and took 25 years to complete.
The asset sales are a way to help pay for projects including new roads in Sydney and Melbourne and fit Abbott’s desire to have the private sector assume roles the government traditionally played. The nation’s budget deficit, which swelled to $48.5 billion in the year ended June 30, also makes divestments more imperative.
Abbott and Hockey have offered the nation’s states and territories incentive payments of 15 per cent of the value of any asset they sell, provided the proceeds go toward investing in new infrastructure.
In July, New South Wales appointed Deutsche Bank AG and UBS to advise on the sale of 49 per cent of its electricity networks in a bid to raise more than A$20 billion. Its southern neighbour, Victoria state, in August hired Morgan Stanley and Flagstaff Partners Ltd. to sell a multibillion-dollar lease to the Port of Melbourne. Queensland has appointed advisers for several assets including ports and power plants valued at about A$35 billion, according to Infrastructure Partnerships Australia.
The advisory fees from those deals alone will be equivalent to more than 10 per cent of the total Australia-related M&A commissions in 2014, Freeman estimates.
Finding buyers for many of the assets shouldn’t be too difficult because of their importance to Australia, according to Goldman Sachs’ Sims. The Port of Melbourne, for example, is the nation’s busiest and handles about 36 per cent of the container trade, according to its website.
The biggest obstacle may be the sheer volume of sales, said Richard Wagner, head of investment banking at Morgan Stanley in Sydney.
“In terms of timing, you certainly want to be first out of the gate if you can be,” Wagner said. “You do not want investors having to make decisions about what assets they focus on.”
Full article: Australia for sale: Investment bankers cashing in on Tony Abbott’s infrastructure push (The Sydney Morning Herald)