This morning Australia's leading investment bank, Macquarie Group Ltd (ASX: MQG) said its shares will remain in a trading halt until tomorrow, as investors digest its latest acquisition and capital raising.
In an announcement to the Australian Securities Exchange, Macquarie said it had entered into an agreement to acquire an aircraft operating lease portfolio from AWAS Aviation Capital Limited, which includes 90 modern passenger aircraft.
"The purchase price for the 90 aircraft is $US4 billion (subject to adjustments). The capital requirement for this transaction is expected to be $0.6 billion," Macquarie said in its media release.
The acquisition will form part of Macquarie AirFinance, a division of Macquarie's Corporate and Asset Finance Group (CAF). It's another sign of the bank's push into 'annuity-style' businesses. Amongst motor vehicles, mining equipment, rotorcraft and more, CAF currently has leases on 130 aircraft.
Macquarie said the average fleet age of the combined aircraft portfolio will jump to 5.2 years, whilst the total value will jump to $9.5 billion, from a current $5.1 billion.
Within the first full year, the acquisition is expected to boost the bank's return on equity, earnings per share (by approximately 5%) and five-year average incremental net profit after tax by approximately $115 million per year.
Macquarie's Head of Transportation Finance Stephen Cook said, "This transaction allows us to acquire high quality assets. It complements our existing aircraft leasing portfolio and diversifies our client base. In the many years that Macquarie has been active in aircraft leasing, we have been privileged to work with some of the world's leading airlines."
Macquarie Group CEO Nicholas Moore said, "This acquisition builds on the strong growth of our Corporate and Asset Finance business and the ongoing investment in our annuity-style businesses."
Macquarie will conduct a $500 million institutional placement (equating to roughly 2% of its market capitalisation) and a share purchase plan for eligible retail shareholders of up to $10,000. However the bank said applications may be subject to a scale back.
Macquarie shares will remain in a trading halt until Thursday.
Should you buy Macquarie Group shares?
Today's announcement is another sign of Macquarie's goal of becoming a more diversified investment bank with a higher proportion of revenue's coming from less volatile 'annuity-style' businesses. However for investors looking to buy Macquarie shares today, it's important to note that the bank continues to derive much of its income from capital markets facing businesses, where the profitability can be largely subject to market conditions. Given we've been enjoying a bull market for a number of years now, investors who exercise patience may be able to buy at a better value point, in the future.
