Macquarie Bank hits back at ATO
(16 June 2011 – Australia) Macquarie Bank started its challenge against a A$95 million assessment by the Australian Taxation Office (ATO) in a case described as the first of its kind by Federal Court judge Richard Edmonds.
The dispute centres on a A$437 million trade by Macquarie in 2004 of a 35.9 percent stake in Minara Resources from private equity group MatlinPatterson. Macquarie's sale of the shareholding just days later for A$478.5 million triggered the events now before the court.
Macquarie claims it is being hit for tax on the profit the US group made on the transaction, on top of the profit Macquarie made, while the ATO has assessed the effect of the trades as giving Macquarie a A$318 million gain.
The case, which began on Tuesday, is slated to run in Sydney for three more days.
The court heard the deal began when MatlinPatterson paid A$161 million in 2003 for the stake, as part of a failed bid to take over what was then a troubled West Australian nickel producer, and Macquarie's John Prendiville approached the US group a year later about a sale after the nickel price and the Minara price had picked up sharply.
Macquarie's equity capital markets unit did a 'bought deal' in February 2004, taking the shares on as principal at A$2.65 each, or about A$1.67 more than MatlinPatterson had paid a year earlier. Macquarie then netted A$41.4 million by on-selling the shares to institutions via a bookbuild at A$2.90 a share. Macquarie later paid A$12 million in tax on its profit.
The ATO alleges the methods used by Macquarie amounted to a tax-avoidance scheme and is seeking a payment on what it says is a A$318 million gain obtained by Macquarie, being the difference between the US group's entry price and the A$2.90 bookbuild price. 'It seems to me the commissioner is seeking to tax the profit made by MatlinPatterson,' said Justice Edmonds.
Macquarie claims it is being hit for tax on the profit the US group made on the transaction, on top of the profit Macquarie made, while the ATO has assessed the effect of the trades as giving Macquarie a A$318 million gain.
The case, which began on Tuesday, is slated to run in Sydney for three more days.
The court heard the deal began when MatlinPatterson paid A$161 million in 2003 for the stake, as part of a failed bid to take over what was then a troubled West Australian nickel producer, and Macquarie's John Prendiville approached the US group a year later about a sale after the nickel price and the Minara price had picked up sharply.
Macquarie's equity capital markets unit did a 'bought deal' in February 2004, taking the shares on as principal at A$2.65 each, or about A$1.67 more than MatlinPatterson had paid a year earlier. Macquarie then netted A$41.4 million by on-selling the shares to institutions via a bookbuild at A$2.90 a share. Macquarie later paid A$12 million in tax on its profit.
The ATO alleges the methods used by Macquarie amounted to a tax-avoidance scheme and is seeking a payment on what it says is a A$318 million gain obtained by Macquarie, being the difference between the US group's entry price and the A$2.90 bookbuild price. 'It seems to me the commissioner is seeking to tax the profit made by MatlinPatterson,' said Justice Edmonds.
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