Macquarie Group

Macquarie Group

September 26, 2007 17:57 ET

Macquarie Group to Acquire Orion Financial Inc.

Combination to create leading Canadian investment banking and securities franchise

TORONTO, ONTARIO--(Marketwire - Sept. 26, 2007) - Macquarie Group (Macquarie), a diversified global financial services organization, today announced that it has entered into an agreement to acquire Orion Financial Inc. (Orion) through a combination of cash and Macquarie Bank Limited shares. When combined with Macquarie's existing Canadian investment banking businesses, the acquisition of Orion's advisory, equity research, sales and trading platform will create a leading investment banking and securities franchise in Canada.

Orion, through Orion Securities Inc., is a well-established Canadian independent dealer focusing primarily on the resources sector. Orion also has expertise in the technology, healthcare/biotechnology and diversifieds sectors. Its primary activities include M&A advisory, equity underwriting, equity research, sales and trading. Orion employs approximately 130 people based predominantly in Toronto, with additional offices in Calgary and Montreal. In the year ended March 31, 2007, Orion generated pre-tax income of C$41 million.

Nicholas Moore, Global Head of Macquarie's Investment Banking Group, said, "We are particularly attracted to the experienced and successful team at Orion. They have a deep understanding of the Canadian market and are highly regarded for the expertise they offer to clients.

"Our objectives in acquiring Orion are firstly, to round out our global resources investment banking business and secondly, to extract maximum advantage from combining their successful Canadian operations in equity underwriting, sales, trading and research with the scale and global reach of Macquarie Securities.

"With Orion joining Macquarie, we see significant opportunities for the combined Canadian team to better access Macquarie's global pool of investment banking products, executives and systems to provide clients with a wider range of services in Canada and elsewhere. Over time, we expect that the combined Canadian business will expand its product offering to complement our existing activities in infrastructure, utilities and resources," said Mr Moore.

Orion's senior management team will remain with the business in key leadership roles within Macquarie's Investment Banking Group, including Doug Bell and Dan Cristall who will assume regional leadership roles in Metals & Mining and Oil & Gas respectively. To assist in integrating Orion and Macquarie's existing Canadian investment banking operations and to maximize future opportunities from the combined business, Paul Donnelly, currently an Executive Director in Macquarie's Investment Banking Group in Australia, will relocate to Toronto to lead the combined businesses.

Dan Cristall, Chairman of Orion, said, "This is an excellent opportunity for Orion and its employees. Combining with a financial services institution the quality and size of Macquarie gives us the opportunity to offer our current and future clients an enhanced product offering and global platform which will be unique in the Canadian marketplace. We like the Macquarie business model, philosophy and entrepreneurial spirit and believe that it will work well with the style of business and clients we have at Orion."

John Prendiville, Head of Global Natural Resources within Macquarie's Investment Banking Group, said, "Orion's business mix, which is predominantly in Metals & Mining and Oil & Gas, and its Canadian client base provides a natural fit with our broader global resources business. Canada is one of the most important resources equity markets in the world and adding an equities, sales and trading platform and greater M&A expertise to our existing Canadian resources business will provide clients with a broader range of services and cross-border M&A opportunities.

"The end result will be a leading, full-service offering of M&A, equity underwriting, research, sales and trading capabilities in key natural resources markets around the world," added Mr Prendiville.

Following a transition period, the business will be re-branded and operate under the name Macquarie Capital Markets Canada Limited with employees of Orion becoming employees of Macquarie.

The consideration for the acquisition comprises two separate components:

- C$30 million will be paid to the vendors in cash upon financial close;

- Macquarie Capital Acquisitions (Canada) Ltd., a Canadian incorporated subsidiary of Macquarie Bank Limited (MBL), will issue 1.6595 million Exchangeable Shares to the vendors. These Exchangeable Shares will be held in escrow and released over a 5 year period. Upon release they will be exchangeable on a one-for-one basis with MBL shares at any time up to 10 years after issue, subject to certain conditions.

This represents a total consideration of approximately C$147 million, based on an MBL share price of A$80.27.

Retention agreements will also be entered into with key Orion employees shortly after completion. Under these agreements a total of 250,500 MBL shares will be allocated within a five year period, with one third of each allocation released on each of the third, fourth and fifth anniversaries of financial close, subject to continuing employment with Macquarie.

The acquisition is subject to regulatory and other approvals. The impact on Macquarie's Tier 1 capital ratio is anticipated to be immaterial. Financial close is expected to occur by the end of 2007.

Macquarie North America Ltd. and Keefe, Bruyette and Woods acted as financial advisor to Macquarie Bank and Orion respectively in relation to the transaction.

About Macquarie

The Macquarie Group (Macquarie) is a diversified international provider of specialist investment, advisory, trading and financial services in select markets around the world with approximately C$200 billion of total assets under management (as of June 30, 2007). Headquartered in Sydney, Australia, Macquarie comprises Macquarie Bank Limited, the leading Australian investment bank, and its worldwide affiliated entities. Macquarie Bank Limited is a top 20 company listed on the Australian Stock Exchange with a market capitalization of approximately C$19 billion as of September 25, 2007. Macquarie employs more than 11,000 people in 24 countries including more than 1,200 people in the Americas in 23 locations.

Macquarie's global equities business, Macquarie Securities, has teams located in the major financial markets around the world providing clients with specialist capabilities in equity underwriting, equity sales and trading, equities research and corporate broking and is consistently ranked highly for its research, sales and execution.

In Canada, Macquarie has had a significant and expanding presence since 1998. Today Macquarie has offices located in Toronto, Vancouver, Montreal, Calgary and Winnipeg employing over 200 people across a range of businesses.

About Orion Securities Inc.

Orion is an employee-owned Canadian independent dealer that provides investment banking services primarily to the resources sector. Orion's focus is on a number of key sectors including Energy, Mining, Technology, Health Care & Biotechnology, and Diversified Industries. Orion's principal activities include M&A advisory, equity underwritings, equity research, sales and trading as well as proprietary trading and market making. Orion has offices in Toronto, Calgary and Montreal.

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