Kerr Neilson kingmaker in Regal’s Platinum play

Veteran fund manager and Platinum Asset Management co-founder Kerr Neilson. Picture: Hollie Adams

Platinum Asset Management has cash and investments on its balance sheet worth about $300m, which means that while Regal Partners may be bidding about $530m for the business, it will get its asset management operation for under $250m if its offer is accepted.

That’s looking unlikely, as it values its rival asset manager at about 90c per share – almost 9 per cent below Platinum’s closing share price on Monday of 99c.

The understanding is that Platinum, co-founded by its 21 per cent shareholder, billionaire investor Kerr Neilson, has cash and term deposits worth $250m and investments worth $60m.

Regal has form in making low-ball bids for rival groups, including Perpetual when it was in play by private equity firms and Pacific Current.

There had been suggestions that mergers and acquisitions activity had been brewing in the asset management space, as reported by DataRoom three weeks ago, and Regal was thought to be involved. But some thought it may target Perpetual following the demerger of its corporate trust unit.

That may still be on the cards in a deal that could even come after bedding down a Platinum takeover.

However, Regal is understood to have been sizing up Platinum for some time, as reported by this column last year, with it holding a stake in the target.

The reason why Platinum did not dismiss the offer outright is thought to be because it may want to walk the Barrenjoey-advised Regal up on price.

Mr Neilson is the kingmaker, and the chatter is that he wants out – but no doubt only at the right price.

What Regal needs to consider is that it currently has net inflows and is valued as a growth business in the asset management space. But Platinum, with about $12bn of funds under management, is losing about $1bn a year so suddenly, if Regal buys Platinum, it moves to a net outflow position.

It’s a similar situation to Aberdeen Asset Management in the UK about a decade ago, which had its Far East Emerging Markets business that was growing, but it was integrated into Standard Life, and became part of an entity with a net outflow position.

But asset management is about monetising one’s investment, a similar to how VGI Partners did when Regal bought the Australian rival business in 2022.

The big global asset management players are not there anymore for mergers and acquisitions of smaller rivals, as the industry’s margins get squeezed, so finding an exit or a way to cash out is not as easy as it used to be as passive funds play more a part in the investment ecosystem.

Regal Partners’ offer was 0.274 shares for each Platinum share held.

Some expect that Platinum would want about $1.40 to $1.50 per share for the business.

One possible rival bidder for Platinum could be a group like Wilson Asset Management.

But Regal may come back with a higher bid. It is keen to buy other fund managers because it needs to increase its market value and free float to gain traction in the market and widen its shareholder base.

Regal Funds Management was founded in 2004 by Andrew and Philip King. It has a number of alternative investment strategies and provides investment management and investment advisory services for a number of Australian unit trusts and Cayman Island companies.

Regal Partners has more than $16.5bn in funds under management.