Washington H. Soul Pattinson managing director Todd Barlow has brushed off concerns that its takeover bid for ethical investment manager Hunter Hall International is at odds with the investment conglomerate’s coal mining interests.
The market was shocked last Friday when Peter Hall, the founder of Hunter Hall, cut a deal to sell a 19.9 per cent stake of the manager to WHSP at less than a third of face value, or $1 a share.
Shares in Hunter Hall crashed as much as 33.9 per cent in trade on Tuesday, before closing down 19.4 per cent at $2.50.
Hunter Hall is well known for its ethical interests and has for 24 years promoted itself as a fund manager committed to not investing in fossil fuel companies.
There has been speculation that shareholders and unitholders may not look too kindly on a deal with WHSP, which controls coal mining giant New Hope Corporation, a producer of 6.6 million tonnes of coal in 2016.
But Mr Barlow told The Australian Financial Review that he doesn’t believe there will be push-back.
“In terms of the approach to ethical investing and the culture of investing inside Hunter Hall, I don’t foresee that will change. Our other holdings are unrelated – we are just a shareholder in Hunter Hall and there may well be shareholders of Hunter Hall who also have shareholdings in a coal company,” he said.
“We just don’t see them as being connected. If you look at the WHSP portfolio, we have a huge number of investments and one of them now is Hunter Hall. I don’t think the fact that we are a meaningful shareholder, will change the culture of Hunter Hall.”
WHSP has also offered to buy Mr Hall’s remaining stake of 24.05 per cent and mop up the rest of the company.
For the deal to progress, Hunter Hall must make a formal recommendation to its shareholders and leave the offer open for a period.
Mr Barlow said shareholders were under no compulsion to accept the offer of $1 per share, which he says the market “doesn’t quite know what to make of”.
He insisted the price was an example of Mr Hall putting the interests of the company, the other shareholders and investors in his funds, before his own.
“He wanted to find a good, solid shareholder who would take over his shareholding and be a stable platform for the business and minimise any disruption, and that was the key thing driving him rather than price”.
Mr Barlow said the offer was “relatively free from conditions and anybody who wants to accept, can”.
Carlos Gil, of fund manager Microequities Asset Management, which owns about 5.8 per cent of Hunter Hall International, is among those that have questioned the transaction.
“This was not a logical sequence of events and the sales process was disorderly and poorly conceived,” he told the AFR on Monday.
Despite the sell-off in Hunter Hall shares on Tuesday, Mr Barlow remained upbeat and said he expected the value of the company would be realised by the market,
“I think the board is going to do a good job of managing the transition following Peter’s retirement. I think over time the shares will reflect the value of the company,” he said.A conclusion of the bid is expected within four weeks.