SYDNEY (Reuters) - Australian investment bank Macquarie Group Ltd (MQG.AX) has targeted A$1 billion ($675.4 million) in its biggest capital raising to ramp up investment and take advantage of expected asset price growth in renewable energy, infrastructure and tech.
The raising comes just three months after Macquarie reported A$5 billion 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 A$118 to A$123.5 each, two people with direct knowledge of the matter told Reuters. It has enough demand to cover the book, which closes late on Wednesday, they said.
The lower end of the price range, is a 4.5% discount to Macquarie’s $123.51 close on Wednesday. However, the final price is likely to be toward the top end, the people said, declining to be identified because the information is private.
Macquarie 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 A$300 million to A$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 at an investor briefing after the announcement.
The money raised “should be enough” to deal with a pipeline of investment opportunities across the company, she said. “We are not expecting to be coming back for capital following this.”
In July, Macquarie said it had A$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.
“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,” UBS said in a note to clients.
Macquarie said Wednesday’s raising follows strong capital investment and further expected spending, as well as the requirement of an extra A$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 favorable conditions were unlikely to be repeated in 2020, without elaborating.
Macquarie currently owns 22 gigawatt of renewable energy assets and this week said it bought the Tysvaer 47MW onshore wind farm in Norway for an undisclosed price. Since March, it has purchased four separate onshore and offshore wind projects and a solar and storage company in the United States.
“Renewable energy is an area where our investors are getting very strong returns,” Wikramanayake said on Wednesday.
Domestically, Macquarie’s major renewable energy assets are two onshore wind farms in Victoria, called Lal Lal and Murra Warra, and the Kwinana waste to energy project in Western Australia.
(The story corrects month to July, from May, in paragraph 9.)
Reporting by Paulina Duran and Scott Murdoch in Sydney; Additional reporting by Jonathan Barrett in Sydney and Aby Jose Koilparambil in Bengaluru; Editing by Richard Pullin and Christopher Cushing