The takeover tussle for ASX-listed Platinum Asset Management will come to a head – or fizzle out – in the next week or two, as three high-profile investment firms assess their next strategic moves.
In the box seat is Phil King’s Regal Partners, which lobbed a share-based offer at an implied value of $1.10 per Platinum share in September and is in the final throes of deciding whether to improve that or walk away. This column can reveal Geoff Wilson’s firm Wilson Asset Management is working with Macquarie Capital on a potential tilt, while the David Paradice-led Paradice Investment Management has Morgan Stanley helping it run bid numbers.
All three parties remain separately engaged on a potential deal, including conducting bilateral meetings and due diligence, but Regal is more advanced in its takeover deliberations. The majority of the due diligence is now done and the decision-making looms large.
A transaction has the scope to again reduce the number of fund managers on the ASX if Regal is victorious, while for Wilson and Paradice they would likely separately back their firms into the listed Platinum vehicle should they step up with a serious offer.
While time is of the essence, there is no firm date for parties to lodge binding offers. Platinum’s board, led by Guy Strapp, is, however, said to want a resolution one way or the other, sooner rather than later.
The three interested parties are all working through scenarios and the real risk that further funds depart Platinum either ahead of, or after, a takeover is announced.
Institutional mandates – from parties such as industry superannuation funds – can disappear quickly, while mum-and-dad investors tend to be stickier. Whether retail money stays with Platinum also depends, however, on what the likes of ratings houses such as Lonsec and Zenith recommend on its global equity investment products.
This column understands an entity associated with Allan Gray was partially behind the $416m in net outflows from Platinum in October, leaving funds under management at about $12.18bn.
Reverse due diligence, where Platinum also takes a close look at Regal or other suitors, has occurred, with the target and its advisers considering the benefits, costs and cultural fit of any marriage.
Investment bank Jefferies is advising Platinum and Regal has homegrown firm Barrenjoey at its side.
Fund outflows have plagued Platinum over the past two years and culminated in a string of personnel changes, including the appointment of asset management stalwart Jeff Peters as chief executive.
He took the reins early this year and has outlined a turnaround strategy including to stabilise Platinum, stem outflows, rationalise products and boost performance.
Fund managers both in Australia and offshore are being hit by a spate of factors including persistent downward pressure on fees, a shift to cheaper passive investment styles and mergers between their larger customers, such as industry super funds, which means fewer pools of money to manage.
Any deal for Platinum is further complicated by those vying for the company having to court billionaire and co-founder of the firm Kerr Neilson, the fund manager’s largest shareholder.
Neilson, who owns close to 22 per cent of Platinum, has plenty of skin in the game and his in-person attendance at the company’s annual general meeting this month shows his strong interest in its future.
Winning over Neilson is hence almost as important as winning over the Platinum board. If the former’s support can be secured early that would apply a lot of pressure on directors to engage on a proposed transaction. The investment bankers would be strategising every possible scenario.
Investors dealt Platinum another blow earlier this month when they delivered the company a damaging second strike against its remuneration, with almost 73 per cent voting against the pay report. Shareholders did not, however, go as far as voting in favour of spilling the board.
Whichever way you look at it, the tussle for Platinum is an interesting test case for Australian-based fund managers as they navigate the challenging road ahead. Many participants in the sector are thinking about the risks involved with bringing firms and cultures together, and whether they’re worth it. Does instability lead to more fund outflows or is certainty as part of a bigger entity a good outcome? Scale benefits and reducing headcount and costs when firms come together are other considerations.
As Regal decides whether to move ahead and formally up its offer for Platinum (the September bid was rebuffed by the target), and Wilson and Paradice either make the numbers work or exit the contest, the target should rule a line in the sand and either engage on an offer or move on from the distraction.
The clock is certainly ticking.
Commissions in focus
AMP late last week became the latest lender to tinker with the commission schedule it pays mortgage brokers, and what it can claw back from them should a home loan be refinanced away or paid off.
Interestingly, the change was accompanied by an across-the-board reduction in the trail commission AMP Bank pays brokers to 0.15 per cent annually, from 0.17 per cent.
That move aligns AMP with what the major banks and regional lenders typically pay in trail commissions, and may have been justified by AMP because it also softened the amounts it will claw back from brokers should home loans not stay on its books for at least 18 months.
It is introducing a new tiered structure on clawback rates from January 1.
Banks typically pay mortgage brokers a 0.65 per cent commission upfront on the drawn loan amount, and a trail commission of 0.15 per cent annually.
Clawback provisions were introduced by banks to foster customer retention and disincentivise mortgage brokers from encouraging borrowers to change home loans too often.
Brokers are also bound by obligations to act in a customer’s best interest.
In recent months, National Australia Bank became the latest major lender to reduce the amount of commission it can claw back from mortgage brokers if a borrower switches home loans in the second year or opts to close the mortgage account.
Commonwealth Bank outlined changes to clawback measures in 2023, opting for a tiered structure from months 14 to 24 of the loan’s tenure. That made it less harsh on brokers in terms of the amount CBA could claw back if the loan was discharged or refinanced to a competitor.
Westpac also introduced a revised broker claw back schedule last year.
The bank did away with the provisions after 18 months, deciding not to claw back payments after that period, rather than the two years it specified previously.
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