Alinta's Babcock nightmare

It's a pity the ASX doesn't encourage annual reunion meetings between boards of directors and former shareholders whom they advised to sell their stock, because it would be interesting to see what Alinta's board would have to say to their former shareholders about their current predicament, or vice-versa.

Alinta, if you remember, conducted a fascinating two-party auction last year between its estranged management team, advised and financially backed by Macquarie, and an opposing team comprising the Babcock & Brown mother ship in league with three of its infrastructure satellite funds and Singapore Power.

The Alinta board, advised by JP Morgan and Carnegie Wylie, and on the recommendation of a Grant Samuel report, told shareholders that they should accept the B&B/Singapore Power bid which included $8.93 in cash and a whole bunch of stock in Babcock related funds.

The problem for Alinta shareholders is that the $7.13 worth of scrip they received for every Alinta share they owned is now worth just $3.24.

Here's a breakdown of what they got.

They received 0.752 B&B Infrastructure securities that were trading at $1.965 each and were therefore worth $1.48 for each Alinta share. They are now trading at 75c and are worth 56c for each Alinta share.

They received 1.599 BBI exchangeable preference shares worth $1.60. Those securities are now worth around 96c to Alinta shareholders.

They received 0.669 B&B Power securities that were trading at $3.44 each and were therefore worth $2.30. BBP shares closed on Friday at 71c and are worth 47.99c for each Alinta share.

They received 0.260 B&B Wind securities that were trading at $1.86 and were therefore worth 48c. They closed on Friday at $1.54 and are worth 40c.

They received 0.301 Australian Pipeline securities that were trading at $4.23 and were worth $1.27 to each Alinta shareholder. APA last traded at $2.96 and were worth 89c.

That represents a few unhappy campers finding themselves with investments that they might not normally have been attracted to.

Exactly how that would have compared to the Macquarie proposal of taking stock in a newly establish fund is a moot point, although it should be noted that those sort of funds, and listed infrastructure generally, have not been travelling well on the market in the past six months. At least this way they got some cash.

But perhaps the most unhappy campers of all are Singapore Power, which actually forked out the cash gratefully received by those Alinta shareholders.

Singapore Power had hoped to sell the assets to its Australian subsidiary SP Ausnet, but that plan was ruined when the board baulked at the last moment in the face of rising debt costs and canned a planned $2.6 billion equity raising.

Still, at least the advisory teams emerged unscathed. As this column noted in December, SP Ausnet still had to pay $26 million of transaction costs. The Pacific Road team led by Peter Nolan and Michael Coffey that was advising it was on a fixed fee, the banking syndicate was due $5-$6 million in commitment costs, and other fees were due to legal firm Mallesons and accountants KPMG.

Singapore Power faced costs of around $133 million, which included an estimated $50 million payment to Alinta advisors JP Morgan and Lazard Carnegie Wylie, payments to its own advisors Morgan Stanley, and significant debt financing fees.

UBS and Deutsche Bank were advising Babcock & Brown and its satellite funds. We don't quite have a fix on what their fees amounted to, but the pleasure it must have given B&B to outpoint its larger rival must have been worth something in an incentive fee.

Mark Carnegie and John Wylie, principals of the corporate advisory and private equity firm Lazard Carnegie Wylie, are investors in Business Spectator.