Wilson Asset Management pulls out of Platinum deal stakes

Wilson Asset Management chairman Geoff Wilson. Picture: Nikki Short

Wilson Asset Management has walked away from a deal with $667m takeover target Platinum Asset Management, according to sources.

Meanwhile, David Paradice’s Paradice Investment Management is also likely to have cooled on the opportunity, given it counts Charter Hall as its 51 per cent shareholder.

Charter Hall announced in December 2021 it had purchased the stake with cash and scrip for $207m, and Charter Hall investors punished the real estate group for the deal by selling off the stock.

It suggests that doubling down in the sector would not be well received.

That leaves Regal Funds Management remaining as the sole bidder.

Most suspect the fund manager, co-founded and controlled by Phil King, would play a waiting game to secure control after his earlier offer was rejected, and is unlikely to bid against itself.

Regal’s listed fund, Regal Partners, offered 0.274 of its shares for every Platinum share and a fully franked special dividend of 20c per Platinum share, in a deal that at the time equated to $1.10 a share. It is now worth about $1.23. That was rejected by Platinum.

Regal has been allowed to carry out due diligence on Platinum with a view to sweetening the deal, while Geoff Wilson’s WAM has also taken a look, but has now moved on.

WAM’s central interest was gaining control of Platnium's listed investment companies.

Paradice has also carried out some due diligence and, like Wilson, could have been viewing it as an exit strategy and a step towards retirement, sources say.

But some say Perpetual and Platinum could merge in about a year once the former has finalised its Corporate Trust unit sale to Kohlberg Kravis Roberts for $2.18bn.

Regal is known for making opportunistic bids for its rivals. It offered $586m for Pacific Current in a deal that was rejected, and previously has bid for Perpetual’s funds management arm before the latter purchased Pendal.

However, it worked for the group with VGI Partners, which it purchased in 2021.

DataRoom reported in August last year that Regal was targeting acquisitions – including Platinum, in which it has owned a stake of more than 5 per cent.

Meanwhile, Platinum’s billionaire founder and 22 per cent shareholder, Kerr Neilson, is believed to be remaining behind the scenes and has not engaged with any of the suitors.

Some are taking this as a sign that a deal is less likely to happen anytime soon, as his involvement is critical to any transaction.

Platinum’s shares have been falling in the past two weeks after a rally following Regal’s offer on September 17.

On November 7, Platinum reported net outflows for October of about $416m.

The sector is facing headwinds. A growing number of passive index funds are outperforming actively managed funds, and superannuation funds are taking more of their funds management capabilities in house.

In 2022, Perpetual bought rival Pendal, but the $2.5bn acquisition was not well received – and after amassing debt to embark on the transaction, it then sold its Corporate Trust unit to KKR to improve the state of its balance sheet.

A merger could make sense with Platinum if their share prices align as groups in the sector look to gain scale.

Regal 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.

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

Some expect that Platinum would want about $1.40-$1.50 a share.