Aussie raiders ride into London town

CANBERRA - The wild colonial boys are back in London.

In the biggest Antipodean assault on the city since Rupert Murdoch rode in and stole the venerable Times from under the noses of the British Establishment, Sydney-based Macquarie Bank is taking aim at another great institution: the London Stock Exchange.

That the almost unknown, and relatively small, Australian investment bank should turn its voracious appetite on such a large target has astounded Britons.

The third-largest exchange in the world, with its listed companies worth a combined 2800 billion ($7235 billion), the LSE's history extends back to the 17th century, when John Castaing first issued stock lists at Jonathan's Coffee-house and was officially founded in 1801.

Australians are far less surprised. The 35-year-old bank that has become known as the "millionaires factory" for the wealth it conveys to its hierarchy has become a relentless acquirer at home and abroad. The question now is whether Macquarie has bitten off more than it can chew and, if it has, whether this is necessarily a bad thing.

Certainly, the possibility of Macquarie forming a consortium for what is expected to be a A$3 billion ($3.26 billion) bid has met with some relish in the City, which sees numerous openings in a battle that has already been joined by German exchange operator Deutsche Boerse and French rival Euronext.

And despite a healthy dose of scepticism, especially in London, a significant body of observers believe Macquarie and the LSE would be a comfortable fit, should the bank's potential bid succeed.

Even if it failed, a number have argued, Macquarie would benefit from a much higher international profile conferred by the credibility attached to last week's announcement.

That announcement amounted only to confirmation of media speculation regarding a possible bid. The LSE, which saw its shares soar with the reports, said it had received no formal approach from the Macquarie Group.

Macquarie said it was, as always, looking at several potential acquisitions, including a possible approach to the LSE. But it said: "Macquarie's deliberations are at the most preliminary of stages and, therefore, there is no guarantee that any such deliberations will lead to a formal approach and/or offer being made to the LSE.

"If any bid were made, it would be as part of a consortium and, if any sort of offer is made, it is likely to be solely in cash."

Macquarie has always been hungry, ever since its beginning as the Antipodean outpost of British merchant bank Hill Samuel, breaking ground with cash management trusts and attracting hungry young talent that led to the creation of the bank in 1986.

The bank snapped up assets in Australia and, increasingly, internationally. Macquarie is now a A$14.5 billion investment house operating in 23 countries, spreading out from Australia to New Zealand, the United States, Canada, Latin America, Asia and Europe.

In 1999, Macquarie bought its toughest rival, Bankers Trust investment bank, for A$110 million, sharpening an operation that was already making a global mark through a newly created infrastructure group that found and exploited a lucrative niche overlooked by much larger international rivals.

Macquarie is now one of the world's biggest toll road developers, with a portfolio ranging from Sydney's eastern distributor to projects in the US and Tanzania.

It owns stakes in airports from Sydney to Brussels; owns the Dreamworld Theme Park on the Gold Coast; and last year its communications infrastructure arm paid A$3.1 billion for British transmission group ntl:Broadcast.

Other recent acquisitions include the ferry service linking the Isle of Wight to the British mainland, 49 per cent of Dutch gas and electricity distributor NRE Holdings and, in Australia, the bulk of regional broadcaster DMG Radio Australia, taking its total of radio stations to more than 90.

And, last week, Macquarie's retirement home division bought a large slice of Moran Group's nursing home business.

This aggressive, entrepreneurial strategy of constant expansion has produced rich rewards for Macquarie, its staff and its investors.

A string of record profits has been reflected in share prices that in the past year have doubled.

In May, the bank announced a 67 per cent surge in net profit to A$823 million, a result that produced a glowing reaffirmation of its reputation as the "millionaires factory" by paying its seven most senior executives a total of A$89.3 million.

The Sydney Morning Herald noted that Allan Moss overtook Westfields' chief Frank Lowy as Australia's highest-paid chief executive with cash and options worth A$18.6 million. Investment head Nicholas Moore and the property boss also eclipsed Lowy's A$14.7 million pay packet, with earnings of A$18.2 million and A$15.1 million respectively.

Announcing the results, Moss confirmed the strategy of increasing international expansion that led to this week's expression of interest in the LSE.

He said most of Macquarie's income would be generated overseas within the next few years.

Macquarie is already one of Australia's biggest global wheels, ranking 21st among the 30 biggest corporate overseas earners by total revenue, and 17th in terms of overseas revenue as a percentage of total earnings, the Business Review Weekly ratings based on March 2004 figures show.

Last May, the bank said almost 40 per cent of its income was now earned overseas, close to double the BRW figures.

Swallowing the LSE by consortium would significantly boost the bank's global expansion ambitions and enhance its international stature.

The LSE meets Macquarie's preference for monopoly or near-monopoly operations that provide, strong, stable cashflows, with opportunities to boost earnings from fees, another key bank strategy.

And future prospects would be bright, given the global clout provided by the world's third-largest sharemarket and the technology-driven globalisation of vast rivers of international savings.

But significant hurdles remain, key among them the bids for the LSE by Frankfurt-based Deutsche Boerse and Euronext, which operates exchanges in Paris, Amsterdam, Brussels and Lisbon.

However, these bidders face considerable internal opposition to their moves.

THE TARGET

* The London Stock Exchange's history extends back to the 17th century, when John Castaing first issued stock lists at Jonathan's Coffee-house.

* It was founded officially in 1801.

* Its symbol is the grasshopper, signifying industry.

* It is the third-largest exchange in the world.

* Its listed companies are worth a combined 2800 billion.

* THE RAIDER

* Macquarie bank was founded in 1986.

* It began as the Antipodean outpost of British merchant bank Hill Samuel.

* Based in Sydney, it is known as the millionaires factory.

* It is now a A$14.5 billion investment house operating in 23 countries.

* Its activities include toll roads, airports, institutional banking, leisure, communications and retirement homes.

* Chief executive Allan Moss is Australia's highest-paid business leader, taking home cash and options worth A$18.6 million.