Fate of Babcock funds on the line
SCOTT ROCHFORT 4:23pm
Babcock & Brown's battle to win back the confidence of its investors continues to go poorly with the prospect it will appoint external advisers to conduct a strategic review of its ailing listed funds to shore up buying support.
Shares of the Sydney-based investment bank dropped 5.5%, or 35 cents, to close at $6.07. One of its units, B&B Infrastructure also tumbled, losing 3.1%, or 2.5 cents, to 77.5 cents, while B&B Power reversed an early fall to gain 8.9%, or 5.5 cents, to 67.5 cents.
With B&B yet to hear back from a syndicate of 25 banks about its main $2.8 billion corporate debt facility, there is speculation the review of the property and infrastructure funds could lead to an attempt to take them private again.
B&B's chief executive, Phil Green, took a brief break to thank his Sydney staff over drinks on Friday night, when he reiterated the company's public stance that it has been unfairly treated by the sharemarket.
But aside from talk that B&B's various funds could seek fresh funds to shore up their overstretched balance sheets, the mother company itself has become subject to takeover rumours, with its shares still down more than 80 per cent from their June 2007 peak.
In London The Independent reported that the US buyout firm Kohlberg Kravis Roberts was considering a possible takeover of B&B. It also mentioned HSBC as another possible bidder.
Any takeover would need to win the support of B&B's senior management, given 40% of B&B shares are owned by staff.
It is unlikely that B&B management would entertain any takeover bid pitched around the company's current share price. "They believe the place is woefully undervalued," a company spokesman said.
The KKR rumours come one month after the New York-headquartered buyout firm announced plans "to begin a new initiative" by establishing an infrastructure fund. It is possible that rather than stage a takeover for B&B, KKR and other investors could help take some of the ailing investment group's listed funds private again.
This could include B&B Power, which some market observers fear will collapse unless it manages to sell some of its assets.
"Infrastructure is a multitrillion-dollar global marketplace with enormous need for private investment," KKR's founders, Henry Kravis and George Roberts, said in a statement last month.
"This new initiative is a logical extension of our business, building on the significant expertise we have established by investing in large, complex and regulated businesses and our record of driving operational improvements in a wide range of industries."
Locally, there has been speculation Macquarie Group might be interested in buying some of B&B's businesses, while other deals may be in the works.
Investors have focused on Babcock & Brown's 37% stake in privately held energy company Coogee Resources as a possible spin off candidate, the Australian Financial Review reported Monday.
Babcock & Brown invested $US232 million ($A243 million) in August and is said to have ``already delivered at least two times" its money as the price of oil surged in recent months.
Perth businessman Gordon Martin, whose family owns 60% of Coogee Resources, is also non-executive chairman of the company. He told the AFR that his family has no plans to sell its stake in the company he founded in 2005.
With Chris Zappone, BusinessDay
The Sydney Morning Herald
BNB
babcock & brown limited
