Macquarie Group (ASX: MQG) is reportedly making moves on timber company Gunns (ASX: GNS), which collapsed last year with around $3 billion in debt. Shareholders in Gunns have already been wiped out, with the firm now in the hands of liquidator PPB Advisory.
Reports in The Australian newspaper suggest that Macquarie has its eyes on the management rights of nine Managed Investment Schemes (MIS) run by Gunns, which are believed to be valued at around $500 million. The schemes were set up to fund tree plantations that had off-take agreements with Gunns, which are now under a cloud. However, the underlying timber assets still have value. The MIS structure is a further complication to the already messy collapse.
The exponential rise and then failure of numerous tree plantation managed investment schemes is a sorry period for Australian investors and a black mark against the greedy financial planners and investment bankers who sold them these highly leveraged, poorly structured MIS. One of the few businesses to navigate its way through the minefield, to its credit, is sandalwood plantation manager TFS Corporation (ASX: TFC), which continues to trade and re-jig its business model.
It’s been a relatively quiet few years for Macquarie’s deal-making division as its tradition investment banking opportunities have been few and far between. This has forced the company to focus on more traditional banking areas like home loans. Shareholders in Macquarie will be pleased to see this move on Gunns and that the investment bank hasn’t lost its desire to sniff out a deal.
As the stock market continues its upward trajectory, it’s easy to forget that shares don’t only go up. Buying solid businesses and staying away from the hype becomes all the more important as valuations become stretched.
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