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Australia's Macquarie to raise US$675 million for renewables, Reuters report

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Reuters is reporting that Australian investment bank Macquarie Group Ltd has targeted AUS$1 billion in its biggest capital raising to ramp up investment and take advantage of expected asset price growth in renewable energy, infrastructure and tech.

The raise comes 3 months after the investment bank reported AUS$5 billion (US$675.4 million) in excess capital, prompting UBS analysts to question the need to sell shares while Goldman Sachs analysts called the exercise a ‘surprise’. The bank is offering shares to institutional investors priced AUS$118 to AUS$123.5 each.

The lower end of the price range is a 4.5% discount to Macquarie’s US$123.51 close on Wednesday. However, the end price is likely to be higher, two Reuters sources said.

The bank said it will spend the money in the current quarter. It declined to comment on demand or the price range. The sale will be followed by another offer to existing investors only, which Goldman Sachs analysts estimate could fetch another AUS$300 million to AUS$600 million.

“The raising is intended to ensure that we are well placed to continue to respond to opportunities that are meeting our return benchmarks,” said Chief Executive Officer Shemara Wikramanayake after the announcement.

She said the money raised “should be enough” to deal with a pipeline of investment opportunities across the company, and continued that “we are not expecting to be coming back for capital following this.”

In July 2019, the bank said it had AUS$5 billion of capital above the regulatory minimum, after reporting record earnings driven by asset sales and profit at its trading and investments units.

Such commentary prompted UBS analysts on Wednesday to question the need to tap markets. UBS said in a note to clients: “This raising indicates that Macquarie’s capital position is not as strong as it previously indicated, and further asset recycling is required to enable additional investments without returning to the market.”

The bank said the raising follows strong capital investment and more expected spending, as well as the requirement of an extra AUS$600 million in capital at its trading division due to its derivative exposure.

Macquarie also said it expected a 10% rise in first-half profit, broadly in line with its previous forecast. It still expects its annual result to be slightly down on last year.

Wikramanayake, who assumed her role late last year, previously told analysts that past favourable conditions were unlikely to be repeated in 2020, without elaborating.

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