Stock takes: Aussie take

The finer details of Deutsche Bank's deal to buy a 49.9 per cent stake in New Zealand's largest broker, Craigs Investment Partners, has some in the market concerned about how the company will be undertaking research on New Zealand's top listed stocks.

Sources say Craigs analysts have been told to take a back seat to allow Australian-based Deutsche analysts to build relationships and help smooth the way for Deutsche's investment banking team.

Last year's big capital raisings were dominated by rival investment bankers First NZ and Goldman Sachs and Deutsche will be keen to build its slice of the pie. Some wonder how well New Zealand companies can be covered out of Australia.

Craigs executive director Neil Craig says all research will come under the Deutsche Bank brand and who covers a company is really "horses for courses".

While SkyCity and Fletcher Building - which are dual-listed - will be covered by analysts from across the Ditch, they will still have on-the-ground research from the New Zealand team.

Craig said that over time the top 10 stocks would be covered by various members of the team.

He said the move was important to help the relationships between Deutsche and the big companies, and nine years of experience in working with Dutch bank ABN Amro had taught Craigs about the potential conflicts that could arise with the arrangement and he was confident the deal had been structured to avoid those.

BACK IN BUSINESS

Recently returned fund management boss Paul Glass has been busy recruiting staff for his new business Devon Funds Management.

Nick Dravitzki is to join the firm as an analyst from NZ Funds Management in mid-May.

The appointment is an interesting choice given NZ Funds' close association with controversial financial advisory business Money Managers. But Glass says Dravitzki is a "good bloke" and comes from the equity side of the business, which has performed well.

Market talk has also centred on Glass poaching staff from his former firm Brook Asset Management but he says that's not the case.

Former MediaWorks boss Brent Impey recently joined the board of Devon and another director is expected to be added soon.

LONG HAUL

Analysts have been quick to back the joint acquisition of Shell New Zealand's downstream assets by Infratil and the New Zealand Superannuation Fund. The $696.5 million deal seems very cheap on an earnings basis.

But Stock Takes worries many are forgetting why it has been sold so cheaply and wonders what the future potential growth of the asset might be. Having two lots of petrol station assets on the market (Mobil is still on the block) and few potential buyers with the right access to capital has proven a boon for the bidders but what happens when it comes time to sell or if one partner wants to get out?

Super Fund head of private markets Matt Whineray says the deal isn't a private equity buy of the type that looks to exit within five to seven years. Both partners are in it for the long haul and if one wants to get out there are clauses built into the contract.

"We haven't gone into this business with the intention of exiting any time soon."

NZ Super is expected to start paying money back to the Government in 2030 but Whineray says it won't need to sell assets like the Shell business to do that.

"[The deal] is just over 1 per cent of the fund so we would never be forced to sell."

He was also coy on how much Infratil's investment management company Morrison & Co would get paid to manage the asset. The purchase will make up around 10 per cent of Infratil's business and will be funded through its bank facilities.

FILL 'ER UP

The deal seems to involve an awful lot of borrowing from the bank with $350 million in debt for the acquisition and a further $250 million for a working capital facility.

Combined, that's more than the $420 million in equity being put in but Infratil's Marko Bogoievski says its core debt to equity is low for an infrastructure investment.

Others have questioned whether taxpayers are getting infrastructure or just a retail business dressed up. Infratil has pointed out the deal includes much more than 229 petrol stations and 95 truck stops and investors seem keen to back the company's move. Since announcing the deal Infratil's share price has risen 7c to $1.72, closing flat yesterday.

AMP has increased its stake to over the 5 per cent threshold while State-owned Accident Compensation Corporation has boosted its share from 6.59 to 7.71. Let's hope the Government hasn't put too many eggs in one basket.