Magellan Sails Out Of Stormy Waters

Sydney Morning Herald

Saturday October 6, 2007

Stuart Washington

THE former investment bankers Chris Mackay and Hamish Douglass have launched a takeover bid to avoid a looming conflict of getting too rich from their Magellan Financial Group business.

Mr Mackay and Mr Douglass were in line to receive "very material" benefits from Magellan that would not be received by shareholders, because of their partial ownership of Magellan's manager, NPH Funds.

NPH Funds is 40 per cent-owned by Mr Douglass, a former Deutsche Bank corporate finance head, and 60 per cent by the listed New Privateer Holdings, which has as its controlling shareholder the one-time UBS head Mr Mackay.

Receiving generous benefits through NPH Funds might have been seen as a slap in the face to wealthy backers who piled into their business offerings in December last year, including James Packer, the former Southcorp boss John Ballard and the Sussan Group proprietor Naomi Milgrom.

As the scale of the fees NPH Funds could receive became apparent in August, Magellan said it would seek a restructure and Mr Mackay stepped down as chairman of New Privateer Holdings.

Yesterday Mr Douglass, who is the chairman of Magellan, and Mr Mackay, who is the deputy chairman and chief stock picker, came up with their "restructure": Magellan announced a complicated takeover offer from Magellan Financial Group for New Privateer Holdings and NPH Funds.

Mr Mackay and Mr Douglass hope the manoeuvre will internalise the management fees and stop the conflict.

But independent directors at New Privateer Holdings - Norman Anderson, David Baer, Peter Montgomery and Alan Naylor - must now decide whether the lucrative fees they were about to receive from Magellan can be adequately replaced by the complex Magellan takeover offer.

The scrip offer includes various mixes of Magellan Financial shares, options and preference A and preference B shares, plus some additional listed Magellan Flagship Fund shares.

Mr Mackay has said of the conflict previously: "We should have been smart enough to, in effect, not have had this in the first place."

© 2007 Sydney Morning Herald

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