Toronto, Calgary Australia's Macquarie Group will pay about $130-million to acquire Calgary-based energy investment bank Tristone Capital Global Inc., creating one of the largest players in the business of financing the global oil and gas business.
The purchase of Tristone will get Macquarie into the property acquisition and divestiture business – essentially playing the role of real estate agent for oil and gas companies looking to buy and sell tracts of land to drill. The deal, first reported in The Globe and Mail a month ago, will also give Macquarie a greater presence in Calgary, Houston, Denver, London and Buenos Aires.
“What it does is, it basically takes our energy business and completes the missing piece of the puzzle for us,” said Paul Donnelly, head of Macquarie Capital Markets Canada.
“We take their strong technical business, and the geographies that they've got that we were weak in, and we plug it into existing global business and our bigger balance sheet and our global securities business,” Mr. Donnelly said .
Tristone, long rumoured to be for sale, will get almost half the money up front in cash, with the rest earmarked for deferred payouts depending on how well the company performs as part of Macquarie.
George Gosbee, Tristone's founder, will remain as chairman while handing off day to day responsibilities for running the operations to Macquarie's Dan Cristall. In an interview from Australia, Mr. Gosbee said that new role will free him from the duty of managing people.
“I get to focus on what I've always been doing and that's building and integrating, so I'm over here trying to develop the platform for how we can expand into this part of the world,” he said.
Investment bankers in Calgary said Tristone had spent a year looking for a buyer, but Mr. Gosbee said Macquarie had pursued him.
“You have to be global,” he said. “I thought you could stop at London, but you really have to focus in this part of the world, in Asia, South-East Asia and the Middle East. That's what I've been trying to do for two years, and Macquarie of all the banks has such a lock-hold in this region of the world.”
The deal will result in about 20 people being let go – two associates in London, and a number of people with administrative, trading and research roles in Calgary. But Mr. Gosbee said it will strengthen Tristone by giving it access to capital.
Running an independent acquisition and divestiture boutique has proved a tough go for Tristone and others. But when combined with a bigger bank, as Bank of Nova Scotia has done with the purchase of Tristone rival Waterous & Co., the business has proved lucrative.
Bigger banks can cross-sell more services such as merger advisory, stock sales and lending to clients doing property deals, generating more profit. They can also use the capital on their balance sheet to do bigger deals.
“You need a few more tools at your disposal when you're an independent firm and all you can offer is investment banking – which is largely M&A – or equity capital markets, which is equity raising,” he said.
In Alberta's competitive investment community, the long-anticipated transaction was met with skepticism. One rival banker said joining hands with Macquarie, an Australian bank that has specialized in mining and infrastructure but has little existing energy expertise, is a strategic mistake, and puts Tristone on a worse footing than if it had linked up with a major Canadian or U.S. bank.
Mr. Gosbee said the firm was debt-free and healthy, and didn't have to sell. He blamed the long negotiation process, which lasted several months, on the complexities of signing contracts with employees across five countries.
“You know what Macquarie said to me? They said yesterday, ‘We're not used to buying such a good business',” he said. “If you were to say, ‘My final sale price today is $110-million and I started a firm with a couple hundred grand in 2000,' it would have been one of the most successful financial companies in Canadian history.”