By Clancy Yeates
Regal Funds Management chief investment officer Phil King has laid out ambitious growth plans for his hedge fund despite a rejected takeover tilt at storied wealth manager Perpetual, as he conceded the market believes the audacious deal is unlikely to proceed.
Sydney-based hedge fund Regal last month made a bold move for Perpetual, one of Australia’s oldest wealth managers, which has a separate agreement in place to merge with rival Pendal. Regal, which last year absorbed prominent hedge fund VGI, teamed up with a private equity fund and made two consecutive bids for the much larger Perpetual, both of which were ultimately rejected.
Investors now believe it is unlikely Regal will come back with a higher bid, after a court ruling that meant Perpetual could face stiff penalties for ditching its merger with Pendal.
Speaking at an event held by philanthropic investment firm Future Generation and moderated by this masthead this week, King said he could not comment on whether Regal could make a further move on Perpetual because he was not on Regal’s board.
However, he also said:“I think certainly the stockmarket has taken the view that another bid from Regal is unlikely.”
Meanwhile, King also said Regal had its eye on further growth opportunities after its merger with VGI Partners in June this year.
The merged company, Regal Partners, raised $110 million from shareholders in September to accelerate its growth strategy, and it said at the time the funds would give the company the opportunity to pursue “inorganic growth.”
This week, King said: “It’s a very exciting time for us, we see ourselves as a growth company. We’ve raised capital already, and we see lots of opportunities for growth.”
King said Regal had made the offer for Perpetual – which was rejected by the target’s board last month – because Perpetual’s share price was “quite depressed,” and because it had been approached by a private equity firm, Barings, which wanted to buy Perpetual’s trust business.
“That gave us a possible opportunity to buy … the funds management for what we thought was a very attractive price,” King said.
Since last month’s NSW Supreme Court ruling, the preparations for the planned merger between Perpetual and Pendal have continued, with Perpetual this week announcing executive positions in the combined group.
Perpetual chief executive Rob Adams will lead the group, and its Australian asset management business will be led by Perpetual group executive Amanda Gillespie.
David Lane, another Perpetual group executive, will lead its asset management business in America, while its UK, European and Asian asset management businesses will be led by Alexandra Altinger, who comes from Pendal-owned UK manager J O Hambro. Pendal shareholders vote on the deal on December 23.
Although investors think it is unlikely Regal will make another move on Perpetual, Morningstar analyst Shaun Ler this week said it was still possible Perpetual could eventually sell its corporate trust business to realise value. Ler argued Pendal shareholders would get more value from merging with Perpetual than remaining independent. “We believe the Perpetual-Pendal tie up is likely to proceed,” Ler said.