Babcock & Brown (BNB)

Submitted by Craig Strzelecki on 2 April, 2007 - 19:57

Babcock & Brown (BNB) have a suspended recommendation and share price target from market analyst UBS. The Board of Alinta has recommended shareholders accept a proposed scheme by a BNB led consortium to acquire all of its shares (in the absence of a superior bid). This bid values AAN at $15, including: $8.50 cash per share and 7.83 BBI, 3.31 BBP, 1.3 BBW & 1.51 APT for every five ANN shares owned. A 40cps dividend (ff) will also be paid bringing the price to $15.40. The analyst views this as a accretive deal for BNB given... (1) It utilises the capital of BNB's funds rather than its own Bal Sheet (2) Scrip component provides roll-over relief and does not use excess capital in its funds (more deals to come?) (3) Creates ongoing management fees for BNB of c$27m p.a. (capitalised value c$340m) (4) Crystallises c$80m revenue to BNB from its c3.5% stake in AAN (pre costs) (5) Singapore Power provides the cash component. Deal not completed yet - no change to forecasts. The analyst sees some potential for a counter bid for AAN (which would crystallise a $37.5m break fee). In either case this provides a significant deal for BNB. They have not changed forecasts but are increasingly confident in BNB's outlook. Key drivers to Babcock and Brown: (1) expanding capital base (2) highly leveraged to its Funds rollout (3) seed assets on its bal sheet (5) diversified rev. Risks for Babcock and Brown: (1) PE is volatile (2) significant interest rate & markets risks.

Babcock & Brown Limited is listed on the Australian Stock Exchange (ASX) under stock code BNB. You can view their investor website here. Babcock & Brown is involved in investment banking, structured finance advisory, arrangement and management businesses, principal investment and other wholesale financial services. BNB was listed on the ASX on 6 October, 2004. Phillip Green is the Managing Director of Babcock and Brown. Find out the meaning of the recommendations in this primer. More Babcock & Brown (BNB) shares recommendations and news. Browse for other stockbroker recommendations. Check your charts and good luck with your share trading!