Please ensure Javascript is enabled for purposes of website accessibility

Why Macquarie Infrastructure Stock Rallied 11% at the Open Today

By Reuben Gregg Brewer - Jun 7, 2021 at 11:46AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The infrastructure company inked a deal to sell some assets. Investors are expecting a nice payday.

What happened

Shares of Macquarie Infrastructure (MIC 0.00%) rose just shy of 12% at one point in the first hour of trading on Monday. The big news is that the investment company, which owns a diversified portfolio of infrastructure assets, announced the sale of one of its entities to KKR (KKR 0.12%).

So what

Macquarie Infrastructure is selling its Atlantic Aviation Group to KKR for $4.475 billion in cash and assumed debt. Atlantic Aviation provides fuel and hangar services to private aircraft at 69 U.S. airports and is the larger of Macquarie Infrastructure's two main divisions. The sale is expected to close in the fourth quarter with Macquarie collecting roughly $3.525 billion in cash from the deal; it will pay its external manager $227 million. But all of this news isn't likely why investors are excited here.  

A person in a suite shooting hundred dollar bills off of a pile in their hand.

Image source: Getty Images.

After the deal closes, and the external manager collects its fee, Macquarie Infrastructure will be left with $3.298 billion with which it has to do something. Right now, it appears that the board intends to announce a dividend of $37.35 per unit. The company has another, smaller division, providing energy services to Hawaii, but the share price is basically trading just a touch above the proposed distribution value. One day ago, meanwhile, it was actually a couple of bucks below that level. So the price jump is basically pricing in the sale and potential for a big cash distribution.  

Now what

It would be an understatement to suggest that this is a material event. In fact, the price gain today doesn't do the news justice, since Macquarie is selling off its biggest business and following through on its intended goal of basically winding the company down. Right now investors have to decide if they want to stick around and collect the cash or sell and take the capital gains. There are tax considerations here, given that dividends and capital gains don't receive the exact same tax treatment.

That said, sticking around means you will still own, indirectly, the company's Hawaii operations, which Macquarie Infrastructure is also looking to sell. The target for the disposition of those assets is 2022, but sticking around means you could be in line for a second payday, although likely a much smaller one.  

Reuben Gregg Brewer has no position in any of the stocks mentioned. The Motley Fool recommends KKR. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Macquarie Infrastructure Corporation Stock Quote
Macquarie Infrastructure Corporation
$4.09 (0.00%) $0.00
KKR & Co. Stock Quote
KKR & Co.
$57.59 (0.12%) $0.07

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 08/16/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.