RPT-BREAKINGVIEWS-Aussie super funds are M&A blessing and curse

By Antony Currie

MELBOURNE, Feb 16 (Reuters Breakingviews) - Activists like Elliott Investment Management often hog the limelight as makers or breakers of mergers and acquisitions. But in Australia superannuation, or pension, funds do a lot of the heavy lifting. Take Monday's agreed A$11.7 billion ($8.3 billion) buyout of Qube QUB.AX. Leading the deal is Macquarie Asset Management, whose interest in taking private the container and logistics firm publicly emerged almost three months ago. But it had to contend with a potential spoiler in the form of UniSuper. Ultimately, the investment house, one of the country's top-five super funds with A$166 billion in assets, joined the deal. But the ability of these money managers to be an M&A blessing or curse is only going to increase.

In this case, UniSuper quickly increased its stake from 6.5% in November to more than 15%. The worry for the wannabe buyers was that UniSuper would take one of two routes: force a price increase for a buyout that was already offering a 28% premium; or scupper the deal. There's precedent for both. In 2023, AustralianSuper, the largest such fund Down Under, successfully opposed a Brookfield-led $13 billion buyout of Origin Energy ORG.AX after bumping its ownership up to 17% from 12%.

That's a crucial level: Australian mergers and acquisitions generally require support from three-quarters of voting shareholders; if, as often happens, a chunk of retail and other investors don't make use of their ballot paper, a 15% or 17% slug can be enough to stymie the buyers. A couple of years earlier, UniSuper both helped negotiate a higher price for the take-private of Sydney Airport as well as rolling its holdings into the transaction. This time, it just did the latter.

What gives it and other super funds such heft Down Under is simple maths. There's some A$4.5 trillion of superannuation assets, most of it overseen by institutional money managers. The total market value of companies listed on the Australian Securities Exchange is A$3.3 trillion. Even though more than half of super assets are invested abroad, that still leaves money set aside for retirees owning a huge chunk.

And the power of these funds will continue to grow. First, because companies have to contribute 12% of employees' total pay to their super accounts; second, because the mostly moribund domestic new listings market combined with their proceeds from a healthy buyout market in recent years means they have even more cash they have to put to work. Sure, they might not quite qualify as traditional activists, but wannabe dealmakers have to accept that it's mostly semantics.

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CONTEXT NEWS

A consortium led by Macquarie Asset Management on February 16 said it had agreed to buy container and logistics company Qube for A$11.7 billion ($8.3 billion). At $5.20 a share, the price is an almost 28% premium to where the stock closed on November 21, the last trading day before Qube revealed MAM had made a non-binding offer for the same amount.

MAM's partners on the deal include pension fund UniSuper, which owns more than 15% of Qube, and Pontegadea, the family office of fast-fashion brand Zara.