Shares of Macquarie Infrastructure (NYSE:MIC) 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 (NYSE:KKR).
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.
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.
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.