Paradise and Wilson mull Platinum Asset merger proposals as Regal finalises due diligence

Two big names in funds management are preparing merger offers for Platinum Asset Management as the firm does due diligence on a takeover offer from Regal Partners.

David Paradice and Geoff Wilson at the offices of Wilson Asset Management. Picture: Supplied

Two of Australia’s best known stock pickers, David Paradice and Geoff Wilson, are circling Platinum Asset Management as the firm progresses non-exclusive takeover discussions with Regal Partners.

Last month, Regal made a non-binding $1.15 per share offer to Platinum to be paid in scrip and special dividends.

The Platinum board rejected the deal – priced at a 16 per cent premium – as being too low, but the two parties are currently conducting due diligence on each other given the offer involves shares in Regal, which may prompt another bid.

Regal co-founder Phil King and chief executive Brendan O’Connor are trying to buy Platinum and build the firm into a $30bn empire, having morphed two years ago from a quiet hedge fund into a listed entity by taking over listed rival VGI Partners.

Buying the Kerr Nielson created Platinum diversifies its investors from cut-throat institutions to higher paying retail customers.

Platinum’s market capitalisation is $673m.

Mr Paradise and Mr Wilson’s motivations for wanting to merge with Platinum are different to King’s. It is understood Paradice Investment Management has signed a non-disclosure agreement with Platinum. Mr Paradise did not respond to calls.

Mr Wilson’s interest in merging with Platinum has been known about for a few weeks, but he is said to be putting the final touches on his proposal, while Paradice Investment Management is a newcomer to the negotiating table.

David Paradice is 0ne of Australia’s top fund managers. Picture: John Feder/The Australian

The two veteran stockpickers both have privately held management companies, although Wilson Asset Management has several listed investment companies.

For either of the two men, merging their companies with Platinum would give them a listed vehicle, and with that a dramatically increased ability to raise funds and greater credibility with offshore investors.

Having a listed company would also allow the founders and their senior staff to take some money off the table by selling shares.

It’s understood that King’s success in taking out VGI is what has given them confidence that such a deal could work for them too.

The tire kicking takeover plays by Mr King, Mr Wilson and Mr Paradice for Platinum highlight just how small the world of funds management is in this country. All three men provide free stock picking services to Future Generation, which donates a portion of its earnings to charities.

When asked if there would be any hard feelings about whom – if any – will win the hand of Platinum, one insider laughed and added, “we’re all big boys.”

As for MrNeilson, who still owns 21.5 per cent of Platinum but is no longer involved in the company, his view on which deal should proceed – if any – remains unclear.

Mr Neilson started Platinum 30 years ago and listed the company on the ASX in 2007 for $5 a share.

It reached its highs a decade later but has since found itself going the way of most active fund managers who are struggling to remain profitable as more investors chose to put their money in cheaper exchange traded products that often outperform them.

Platinum shares closed 2.1 per cent lower at $1.16 on Thursday, even with a non-binding bid on the table.

The company has $250m of cash.

Regal is an outlier when it comes to FUM, having enjoyed organic growth on top of its growth through acquisitions.

Mr O’Connor told The Australian last week that the firm’s aspirations are to move from a $17bn manager to a $50bn manager, but not to chase deals just for the sake of increasing FUM.

In the past three years it snapped up VGI, the deal that gave it a listing on the ASX – along with PM Capital, Merricks Capital and a stake in Taurus Funds Management.

Regal also tried to jimmy in on the Perpetual-Pendal takeover with a bid for the former that its board would not consider, and chatted to beleaguered funds giant Magellan but was knocked back early on in the conversation.

Wilson Asset Management is another that has seen its FUM steadily rise, from $804m a decade ago to $5.88bn now.

Originally published as Paradise and Wilson mull Platinum Asset merger proposals as Regal finalises due diligence