Management move opens the way for a takeover

THE $2.3 billion listed infrastructure fund DUET Group has proposed internalising its management, which could be followed by a takeover offer.

THE $2.3 billion listed infrastructure fund DUET Group has proposed internalising its management, which could be followed by a takeover offer.

Externally managed funds are difficult to take over due to the conditions and poison pills often embedded in management agreements.

In DUET's case, it will be one of the last listed infrastructure funds to bring management in-house after Macquarie raised more than $400 million in 2009 internalising a suite of managed listed funds.

The tide has turned against externally managed funds on the basis most charged excessive fees and had interests not necessarily aligned to those of investors.

The internalisation of DUET's management - if approved - will be a nice one-off payment for joint external managers AMP and Macquarie Group. Between them, they will get an estimated $98 million in cash and securities, a pretty rich compensation package, albeit not the most generous received to ditch external managers.

It comes as Macquarie grapples with life as an investment bank and AMP is digesting its AXA acquisition.

DUET was established in June 2003 as a wholesale unit trust. A year later it listed on the ASX, and AMP set up a joint venture by selling to Macquarie 50 per cent of the entities that held DUET management rights. DUET's portfolio of assets includes investments in the Dampier Bunbury Pipeline, United Energy Distribution and Multinet Gas.

There is a lot of activity in the listed infrastructure space, with Australian Infrastructure Fund and Hastings Funds Management announcing in June the board was in talks about internalising management.

Hastings and Hastings Diversified Utilities Fund are at the centre of competing bids from Pipeline Partners and APT Pipelines, and received a decision by the Takeover Panel yesterday that it had declined proceedings on an application from investor AFIC into the affairs of Hastings.

The application concerned the provision of a full independent evaluation of the internalisation of management of Hastings Diversified in the context of a takeover bid for Hastings by Pipeline Partners. The battle ensues.

InvestSMART FORUM: Come and meet the team

We're loading up the van and going on tour from April to June, with events on the NSW central & north coast, the QLD mid-north coast and in Perth, Adelaide, Melbourne, Sydney and Canberra. Come and meet the team and take home simple strategies that you can use to build an investment portfolio to weather any storm. Book your spot here.

Want access to our latest research and new buy ideas?

Start a free 15 day trial and gain access to our research, recommendations and market-beating model portfolios.

Sign up for free

Related Articles