Macquarie to split gems from dud pikes

Macquarie are proposing to split their portfolio of pikes into the gems (called Mature MIG) and the duds called (called Active MIG). For the MMIG gems investors will pay a premium but will see the returns roll in steadily. The duds, Macquarie management will be working their tails off - active management - to make them less duddish. But being a more dicey investment AMIG the dud securities will probably sell at a lower price.

Macquarie of course don't see AMIG as 'duds,' nor in all seriousness do we. The duds are doing poorly in the current economic environment but longer term and with good management they have decent potential.

Mark Johnson, MIG chairman is quoted:

“All assets within the MIG portfolio are high quality toll roads with attractive concession agreements.  This has been demonstrated by the turn around in the first quarter results with MIG’s revenue and EBITDA from road assets increasing 5.1% and 5.9% respectively and the weighted average traffic increasing by 1.6%. We see the future of both investment vehicles as being very positive."

The split in Macquarie Infrastructure Group is being put to shareholders at the annual general meeting in Sydney.

Based on an end financial year (Jun 30 2009) valuation MMIG would be valued at $A3.64b ($3.31b) and AMIG $A1.45b ($1.32b) @$A=91c.

MMIG would comprise:

- 407ETR Toronto $A3.28b ($2.99b)

- Westlink M7 Sydney $A359m ($327m)


AMIG would comprise:

- M6Toll Birmingham $A412m ($375m)

- APRR France $A448m ($408m)

- Chicago Skyway $A148m ($135m)

- Indiana Toll Road $A98m ($88m)

- South Bay Expressway, San Diego A$0 ($0)

- Dulles Greenway, Washington DC $A343m ($309m)

- Warnow Tunnel Germany $A1m ($910k)

- Transtoll, system integrator & toll services

The two groups would have separate management.

Managers

Peter Trent a current senior executive of MIG and Mary Nicholson current MIG CFO have been offered the positions of chief executive officer and chief financial officer of AMIG, while MMIG characterized as having stable capital structure and mature cash flow would be run by John Hughes, current MIG CEO and Luke Oxenham currently a senior executive of MIG as CEO and CFO.

Mark Johnson, chairman of MIG was quoted: “The proposed restructure will result in the separation of MIG into two listed groups with different characteristics. The MIG boards believe that this restructure will unlock value in MIG as it provides security holders with greater clarity around the investment profile of the two separate portfolios."

MIG has hung in despite the financial meltdown, EBITDA just a tad up this financial year (2008-09) $A882m v last (2007-08) $A877m. The group gets a horrible press especially in Australia even though overall it has been a better investment than many larger and better known companies in other fields.

We think their underlying PR problem is that black 'evil eye' logo.

Presentation on Mac Split:

http://www.tollroadsnews.com/sites/default/files/MIGprsntn.pdf

TOLLROADSnews 2009-10-29