Pinnacle Ethical Investment Holdings Limited, a wholly-owned Pinnacle Investment Management subsidiary, has made a takeover offer for ethical investment firm Hunter Hall Limited.
The offer follows the departure of Hunter Hall’s founder and chief investment officer Peter Hall, who announced his resignation to the market towards the end of December 2016, and sold 19.9 per cent of the business to Washington H. Soul Pattinson (WHSP) the same day.
WHSP purchased the 19.9 per cent stake at $1 a share, a 60 per cent discount to the stock’s trading price at market close the day before, and subsequently issued a takeover bid for the company at the same price.
Speaking to InvestorDaily on 9 January, Hunter Hall chair Kevin Eley said Washington H. Soul Pattinson were an excellent business, but acknowledged that Hunter Hall shares were “worth a lot more than a dollar”.
Pinnacle Ethical Investment Holdings Limited has offered $1.50 per share, payable in cash, which the company has raised through the issuance of $30 million in placements and a debt facility with the Commonwealth Bank.
The company has also said it will raise the offer to $2 per share if the bid receives acceptances for more than 50 per cent of Hunter Hall Limited’s issued capital and certain conditions are met.
The conditions Pinnacle Ethical Investment Holdings outlined include that Hunter Hall’s funds under management remains above $900 million, that no material adverse change to financial performance or prospects is suffered and that the company remains the manager of the Hunter Hall Global Value listed investment company.
“We have great respect for Hunter Hall and have been reviewing a potential investment in the company for approximately two years,” said Pinnacle Investment Management managing director Ian Macoun.
“We believe we are the ideal partner for Hunter Hall and its fund investors to assist in managing a successful transition following Peter Hall’s departure, we are keen to work closely with the board of Hunter Hall international and its shareholders to ensure an outcome that is in the interests of all stakeholders.”
The company said it intends to engage with Hunter Hall’s board to conduct “comprehensive due diligence” into a number of areas, including “the recent poor performance” of Hunter Hall and its listed investment company, as well as issues raised by Wilson Asset Management chair and Hunter Hall Global Value investor Geoff Wilson.
These issues, outlined in a letter sent to Hunter Hall Global Value directors by Mr Wilson and later released on the ASX, included the discount to net tangible assets within the fund and corporate governance concerns, which he argued were exacerbated by Mr Hall’s “unexpected and unprofessional” resignation.
Hunter Hall Limited has said its independent board committee will review Pinnacle’s offer and “continue to assess all other strategic alternatives available to the company”.
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