PRINCIPAL ACTIVITY Allco Equity Partners Limited (AEQ) has been created by Allco Holdings and LJCB Finance, for the purpose of investing in private equity transactions (both direct equity and mezzanine style investments) and activist or opportunistic public market situations. As the Allco Group and LJCB Investment Group have expertise in the financial and related services sector, a higher proportion of investments entered into are likely to be in this sector. The company will engage in both short-term transactions, and investments up to and exceeding a period of five years.
In regards to private equity transactions, the company intends to focus on leveraged buyout acquisitions (LBO's) rather than venture capital transactions
In regards to activist or opportunistic positions in listed companies, the company is most likely to invest in entities that it views as standalone investments.
DIRECTORS Mr David Raymond Coe Mr Marcus Derwin Mr Geoffrey (Geoff) Morgan Mr Greg Woolley Mr Peter W Yates
PRINCIPALS Chairman Mr David Raymond Coe MD/CEO Mr Peter W Yates Company Secretary Mr Marc Logan
Allco stake 'not backdoor move' Unlisted structure finance expert Allco has now differentiated itself from peer Macquarie Bank by investing a significant amount of its capital in its listed specialist investment vehicles. Macquarie has little long-term investment in its listed infrastructure vehicles, sparking a long-running debate about the merits of "internalising" management of the vehicles. But Allco, by increasing its stake in Record Investments to up to 25 per cent and investing $158 million, can claim that its interests as the external manager of Record and Record investors' interests are truly aligned. Well, that's the party line, as Record still had some convincing to do, from what Street Talk heard after yesterday's institutional investors' briefing. Record denied this was the first stage of a plan to "backdoor" Allco into Record. Despite the reservations, the plan to raise the money in two tranches and replace Record chairman Tony Berg with Allco boss David Coe was greeted warmly, even though it means other Record investors will be diluted thanks to Allco's preferred run at the new equity. Record noted the issue to Allco at $5.25 a share or an 11 per cent premium to the three-month average price, but after the latest rally, it's actually a 13 per cent discount to Record's $6.04 close. To fund its investment, Allco is undertaking a capital raising through its recently listed Allco Hybrid Investment Trust, and will get it as a loan from Allco. Record is being advised by Gresham, of which Berg is a board member, and Record is getting shareholder approval to make sure it's all seen to be above board. Just to show how hot the alternative investment space is, the Allco empire now has three capital raisings running at once the Record Realty's $50 million rights offer, the $550 million Peter Yates-run Allco Equity Partners cashbox and the planned Allco HIT raising. To some, it looks like top-of-the-market activity, but following the smart money is an investment truism. Coe is a smart operator who now has 150 million reasons to ensure Record keeps producing those 20 per cent plus returns. While many have given up on the prospect of Burns Philp counter-bidding for National Foods, it is not the type of company that is likely to leave its balance sheet lowly geared for long. Credit Suisse First Boston yesterday lifted pre-goodwill forecast earnings for Burns Philp by 10 per cent as it saves money on flour purchasing from falling wheat prices. But the real opportunity for improved value comes from a big acquisition, which could add 3 ? a share or 45 per cent to earnings. Burns Philp acquired Goodman Fielder last year on a multiple of 5.5 times earnings before interest, tax, depreciation and amortisation, after extracting $85 million of cost savings, and CSFB identifies New Jersey-based Pinnacle Foods as a target that fits the same mould. Pinnacle looks like a mini-Goodman Fielder, owning frozen seafood and pizza brands among others. It appears to be owned by private equity investors and management. The company was acquired for $US485 million and subsequently merged with Aurora Foods this year. Aurora is thought to have had at least $US400 million of bonds, so it's possibly a $US1 billion ($1.3 billion) business just about the right size for Burns Philp to digest
http://www.theaustralian.news.com.au/wireless/story/0,8262,2-11440760,00.html Allco gets flying start for float By Robert Clow November 20, 2004 ALLCO Equity Partners yesterday joined the rush to market, announcing the float of its much ballyhooed $550 million private equity fund to be headed by former Publishing & Broadcasting chief executive Peter Yates.
Slated for listing on December 20, the offering is already flying off the shelves, with potential investors proffering more than $1billion. "We are very pleased with the response," Mr Yates said. Shares in Allco Equity Partners will be priced at $6 and the capital will be paid in three $2 instalments to reflect the fairly long lead time in putting private equity money to work. The AEP offering seems exceptionally well timed. The market is close to record highs and Australia's faith in its financial services companies has recently been underlined by Macquarie Bank's record results and Babcock & Brown's runaway stock market debut. IBT Education, a company offering bridging courses to help foreign students gain enrolment at Australian universities, yesterday kicked off a $51 million public offering ahead of a planned listing on the stock exchange. And Hunter Valley coal miner Resource Pacific Holdings closed its $44 million initial public offering early and oversubscribed. The AEP offering was underpinned by three core shareholdings. David Coe's Allco Financial, the Liberman family and the fund's management have subscribed to $200million of the equity between them. But AMP Capital Investors also underlined its faith in the offering with another $75 million investment. There seems likely to be relatively little left for retail investors, given that the next four institutional shareholders snapped up $175 million and another $25 million is earmarked for shareholders in Record Investments - Allco's listed structured finance affiliate. On top of that, managers are slated to be granted 10 per cent of the company, locked up for 10 years, as part of the offering. The abundant demand is great news for Credit Suisse First Boston, which underwrote $500 million of the offering. (A typical underwriting fee is 3 per cent of the offering.) Despite the enormous demand for the offering, it is not without its risks. Given the high concentration of the stock in a few hands, trading could be illiquid, and the company's results are likely to be lumpy, because that is the nature of private equity. But the 15 per cent hurdle rate before management gets any performance fees should provide some reassurance. Private equity investors are typically either venture capitalists, nurturing companies from their earliest stages with seed capital and intensive management involvement, or buyout specialists, adding value to undervalued companies with a mixture of financial know-how and management skills. AEP falls into the latter category. The fund will concentrate on the industries where it has a clear edge. Allco is strongest in financial services, but Mr Yates should also bring skills in media and gaming. Private equity is typically employed where a family-owned business runs into succession problems, a publicly traded company wishes to spin off a non-core division, or a company has been laid low by lack of capital or management skill.
The Australian
$550m 'cash box' ready to roll By Christian Catalano November 20, 2004 Former Publishing and Broadcasting Ltd chief Peter Yates has completed a rapid return to the Australian business scene, announcing yesterday that the private equity and corporate raider fund he has taken charge of will complete a $550 million float before Christmas. Investor interest in the Allco Equity Partners (AEP) float was massive, with an initial book-build process believed to have attracted more than $1 billion in initial applications. This is despite the fact that AEP - which has the primary backing of financier David Coe and Melbourne's wealthy Liberman family - will essentially be a listed "cash box" fund, with no current investments. But a lack of large Australian floats in recent months and the imminent sell-off of News Corporation shares as it reincorporates to the US has created investment demand from local fund managers, a host of which have subscribed to the AEP offer. The fund's two biggest backers are Mr Coe's private company Allco Finance Group and the Liberman family's LJCB Investment Group, which will take $200 million of shares, or 36 per cent of the listed company. AMP Capital Investors are the next biggest backers in AEP with $75 million, while three other major institutions are believed to have invested $160 million between them. It was Mr Coe and the Liberman family who earmarked Mr Yates for the managing director's role earlier this month. Mr Yates, a highly successful investment banker with Macquarie throughout the 1980s, said yesterday: "AEP represents an exciting opportunity to invest in the private equity and public markets, using the skills and resources of two very successful Australian investment and financial groups." Mr Yates' primary role will be "to invest in unlisted private and public company situations". These will include buying out underperforming assets from other companies, funding for other pre-float situations, corporate restructuring and recapitalisation of existing entities. AEP is believed to have received special approval from the Australian Stock Exchange, which has traditionally frowned upon the listing of equity funds that do not hold any investments. But to reflect the time it may take for Mr Yates and his time to find suitable opportunities, AEP shareholders would only have to pay for their initial $6 shares in three equal parcels of $2 over two years. The float will put Mr Yates back in command of a public company less than six months after he announced his retirement from PBL. In September PBL announced that Mr Yates had pocketed a final pay packet of $10.55 million, including a $6.54 million termination payout. Mr Yates is believed to have invested some of this in the AEP offer.
Company Details Company Name: Allco Equity Partners Limited Industry Sector: Investment and Financial Services ACN: 111 554 360 Address: Level 24 Gateway, 1 Macquarie Place, Sydney, NSW, 2000 Website: http://www.allco.com.au Telephone: 1300 307 601 Information: Private equity has long been considered an attractive and desirable alternative asset class, owing to it's potential superior returns compared to those generally available from public markets. However, this class of investment has not generally been available to the public or to investors that require liquidity through a stock exchange listing. In Australia, there have been a number of activist or opportunistic public market situations in which shareholders were either too fragmented or unwilling to commit the time and effort required to acheive corporate change. The Offer provides the opportunity for investors to participate directly in private equity transactions and activist public market situations through a freely tradable security listed on the ASX.
The involvement of the Allco Group and the LJCB Investment Group differentiates the Company from other private equity investment opportunities. The Company is expected to benefit from the private equity transaction flow originated by these two organisations, the financial structuring skills of the Allco Group and the public marktet experience of the Manager's executive team.
The Allco Group has consistently created value for the shareholders of the companies it has created and listed, such as Record Investments, Record Realty and the Allco Hybrid Investment Trust. The Allco Group has also founded a range of successful private businesses in the field of financial services, including RAMS Home Loans, Rentworks, Mobius Financial Services and The Mortgage Insurance Company.
The Directors believe that the Company represents an attractive investment proposition as a result of the experience of the Manager's executive team; the strong track records of, and the transaction flow emanating from, the Allco Group and the LJCB Investment Group; the financial structuring skills of the Allco Group; and the flexible investment strategies of the Company.
Offer Information Offer Status: Open Open Date: 26th November, 2004 Close Date: 10th December, 2004 Float Date: 22nd December, 2004 Issue Price: $6.00 Amount Sought: $500,000,000 Number of Shares: 83,333,333 Market Cap at Issue Price: $555,555,552 Corporate Services Accountant: Deloitte Touche Tohmatsu Auditor: KPMG Share Registry: Computershare Registry Services Pty Ltd Manager: Tricom Equities Limited Manager: Bell Potter Securities Limited Manager: E.L & C. Ballieu Stockbroking Ltd Lead Manager: Credit Suisse First Boston Australia Equities Priv Lawyer: Mallesons Stephen Jaques Board Members Chairman: David Coe Managing Director: Peter Yates Director: Marcus Derwin Director: Geoff Morgan Director: Greg Woolley
