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Macquarie (MIC) to Divest MIC Hawaii to Argo Infrastructure

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·4 min read
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Macquarie Infrastructure Corporation MIC recently entered into an agreement with Argo Infrastructure Partners, LP’s affiliate for the divestment of its MIC Hawaii segment. The completion of the transaction, which is expected in the first half of 2022, is subject to certain customary conditions and approvals from Macquarie’s shareholders.

Notably, the company’s shares declined 0.5% yesterday, ending the trading session at $38.73.

Based in New York, Argo is an investment management company, involved in investing in infrastructure. The company is engaged in managing more than $5 billion of capital on behalf of its institutional investor partners.

Inside the Headlines

Macquarie’s MIC Hawaii segment comprises an energy company — Hawaii Gas — that processes and distributes gas and provides related services as well as several smaller businesses. These are collectively engaged in reducing cost as well as improving reliability and sustainability of energy in Hawaii.

The segment generated $54.6 million in revenues in first-quarter 2021, reflecting a year-over-year decline of 9.8%. The segment’s sales accounted for 20.7% of the company’s total revenues in the first quarter.

As noted, if the transaction gets completed on or before Jul 1, 2022, Argo will be required to fund a disposition payment of about $82 million to Macquarie’s external manager. However, after Jul 1, 2022, the disposition payment will be $57 million.

Macquarie’s unitholders will likely receive $3.83 per unit if the transaction gets completed on or before Jul 1, 2022. On closing after this date, unitholders will be entitled to get a consideration of $4.11 per unit. On completion of the transaction, the MIC Hawaii businesses will operate as a wholly owned subsidiary of Argo.

This divestment agreement is in sync with the company’s strategic alternatives (announced in October 2019) that include disposing of businesses to unlock values for its shareholders. In December 2020, Macquarie completed the divestment of its liquid storage and handling business, International-Matex Tank Terminals, for a total consideration of $2.67 billion to an affiliate of Riverstone Holdings, Inc. Also, in June 2021, it agreed to divest its Atlantic Aviation segment to KKR & Co. Inc. in a transaction worth $4.475 billion. Notably, it is expected to be completed in fourth-quarter 2021.

It’s worth noting that at the special meeting held on May 6, 2021, Macquarie received an approval from its shareholders to reorganize the company into a listed limited liability company, Macquarie Infrastructure Holdings LLC. The reorganization is expected to be completed before the completion of the Atlantic Aviation divestment. Notably, Macquarie will no longer remain a publicly traded company.

Zacks Rank, Price Performance and Estimate Trend

The company with a market capitalization of $3.4 billion, currently carries a Zacks Rank #2 (Buy). It is likely to benefit from a solid pipeline of projects, cost-control measures and investment in growth capital projects in the quarters ahead.

In the past three months, the company’s stock has gained 21.1% compared with the industry’s growth of 8.4%.

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The Zacks Consensus Estimate for Macquarie’s earnings is pegged at $2.12 for 2021 and $2.58 for 2022, reflecting growth of 18.4% and 5.7%, respectively, from the 60-day-ago figures. Also, the consensus estimate for second-quarter 2021 earnings is at 44 cents, up 25.7% from the 60-day-ago figure.

Other Key Picks

Some other top-ranked stocks from the same space are Griffon Corporation GFF, Crane Co. CR and ITT Inc. ITT. While Griffon sports a Zacks Rank #1 (Strong Buy), Crane and ITT carry a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Griffon delivered an earnings surprise of 50.00% in the last reported quarter.

Crane delivered an earnings surprise of 26.72% in the last reported quarter.

ITT delivered an earnings surprise of 21.84% in the last reported quarter.

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