Macquarie fund buys terminals business in American expansion

A fund managed by Macquarie Group Ltd. agreed to take full control of a U.S. bulk liquid terminals operation for $1.03 billion in cash and stock as Australia’s largest investment bank expands its North American businesses.

Macquarie Infrastructure Co., which owns storage terminals for oil products and chemicals in the U.S., will buy the 50 percent of International-Matex Tank Terminals it doesn’t already own, it said in a statement yesterday. The deal also will boost quarterly dividends, it said.

The acquisition is the latest transaction in the terminals business for Macquarie. The bank agreed in August to buy 45 percent of Singapore’s Helios Terminal Corp. from Oiltanking Gmbh for an undisclosed sum. It also bought ANZ Terminals for A$525 million ($492 million), the Australian Financial review reported June 30.

“There has been an emphasis on the commodities business as Macquarie sees it as a stable business in the long run,” David Ellis a Sydney-based analyst at Morningstar Inc. said by phone. “It plays into their strategy to boost steady revenue streams to offset the cyclical nature of their advisory and equity trading businesses.”

Macquarie Infrastructure has gained 12 percent in New York trading this year. Macquarie Group closed 0.8 percent lower at A$59.73 in Sydney. The benchmark S&P/ASX200 index fell 0.1 percent.

The accord comes after years of disagreement and arbitration between Macquarie and other investors, including members of International-Matex’s founding Coleman family, according to U.S. regulatory filings. Macquarie Infrastructure bought its initial 50 percent stake in the company in May 2006.

Founding Family

Macquarie Infrastructure will purchase the stake from the Colemans, the New York-based company said in a statement. Members of the family will step down from roles as chairman, chief executive officer and head of government relations.

International-Matex owns and operates 12 bulk liquid storage terminals in North America, with a capacity of 42 million barrels, including marine terminals on the U.S. east, west and Gulf coasts, according to a company website.

Macquarie’s funds management business is the group’s largest revenue contributor. Its operating income climbed to A$1.93 billion in the year ended March 31, up 27 percent on the previous year, filings show. Macquarie’s infrastructure business is a part of the funds management unit.

Income from its business in the Americas, largely in the U.S., overtook its home market of Australia for the first time and contributed 35 percent of total income, according to the filings.

Dividend Growth

“The acquisition will deliver dividend growth for shareholders of MIC and further enhance our ability to drive operational improvement and growth investments,” James Hooke, CEO of Macquarie Infrastructure, said in the statement.

With the signing of the deal, Macquarie Infrastructure will increase its quarterly cash dividend. The dividend payable for the second quarter will be 95 cents a share, up 1.3 percent from the prior quarter. The dividend will be payable on Aug. 14 to shareholders on record on Aug. 11.

Macquarie Infrastructure said it will buy the remaining stake for $910 million in cash and $115 million in stock.

After the deal, International-Matex will become the largest business division within Macquarie Infrastructure, which has a market value of $3.5 billion. The company said it doesn’t expect the transaction to close before late July.

Macquarie Infrastructure’s earnings before interest, taxes, depreciation and amortization, or Ebitda, from International-Matex has more than tripled to $279.6 million for the 12 months through March 31, the company said in its statement. Macquarie’s 50 percent stake in the business contributed $39.7 million to Macquarie’s first quarter Ebitda, according to the company’s earnings report April 30.