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Macquarie shares in a trading halt after launching $1 billion capital raising

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The Macquarie Group Ltd (ASX: MQG) share price has been placed in a trading halt and won’t be going anywhere on Wednesday.

Why are Macquarie shares in a trading halt?

The investment bank requested a trading halt this morning whilst it seeks to raise $1 billion in the form of a non-underwritten institutional placement and additional funds from an associated share purchase plan.

According to the release, management has made the move in response to its recent strong net capital investment and its projected deployment of capital on business growth across the group.

It expects to make approximately $1 billion in net capital investment in the current quarter ended September 30 2019. This includes investments in the renewables, technology, and infrastructure sectors across most regions primarily by Macquarie Capital; and an anticipated increase in capital deployment by Macquarie Asset Management and Macquarie Capital.

The company’s chief executive officer, Shemara Wikramanayake, explained: “We have continued to identify opportunities to invest capital with the potential for attractive risk-adjusted returns for shareholders over the medium term. Raising new capital at this point allows us to maintain strategic flexibility in light of these opportunities.”

The institutional placement is expected to raise approximately $1 billion at a placement price which will be determined via a bookbuild process. This represents approximately 2.5% of total existing Macquarie shares on issue.

After which Macquarie will offer eligible shareholders the opportunity to participate in a non-underwritten share purchase plan with a maximum application size of $15,000 per eligible shareholder.

These new shares will be issued at the lower of the placement price and a 1% discount to the VWAP of Macquarie ordinary shares traded during the five ASX trading days immediately prior to and including the share purchase plan closing date which is expected to be September 20.

Trading update.

In addition to this placement and share purchase plan, Macquarie provided an update on its performance and expectations for the first half.

According to the release, the company continues to expect its result for FY 2020 to be slightly down on FY 2019. However, in the first half the company expects to deliver growth of 10% on the prior corresponding period, with the second half likely to be the main drag on its performance.

This is because the second half of FY 2019 benefited from increased contributions from the markets-facing businesses which are unlikely to be repeated this time around.

But over the medium term, management advised that it “remains well positioned to deliver superior performance. The Group has deep expertise in major markets, and we continue to build on our strength in diversity and adapt our portfolio mix to changing market conditions. We are seeing the ongoing benefits of continued cost initiatives, our balance sheet is strong and conservative, and we have a proven risk management framework and culture.”

Elsewhere in the sector, Australia and New Zealand Banking Group (ASX: ANZ), Commonwealth Bank of Australia (ASX: CBA), and the rest of the big four are all trading notably lower today amid general weakness in the banking sector.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Macquarie Group Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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