A new, mid-sized fund manager is set to emerge with the planned merger of the privately owned Pengana Capital with Hunter Hall International, which will see Hunter Hall's days as an independent fund manager end with Pengana to become the dominant partner in the enlarged group.
The tie-up will result in Hunter Hall's funds under management rising from less than $1 billion to an estimated $3 billion, and bring to an end a messy period which has continued over the past 10 weeks as rival parties have sought to gain control of the company following the surprise decision of its founder and largest shareholder, Peter Hall, to sell out.
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Peter Hall resigns from Hunter Hall role
Fund manager Peter Hall confirms his resignation as chief investment officer of Hunter Hall stating personal reasons. Vision courtesy ABC News 24.
Shares in the listed fund manager surged on Friday although the financial details of Pengana Capital have yet to be disclosed.
Mr Hall sold a block of 19.9 per cent of Hunter Hall's capital to Washington H. Soul Pattinson and Co for $1 a share in December, when shares in his company were trading at close to $3.
Since then, a series of buyers have been vying for Mr Hall's remaining 25 per cent stake in Hunter Hall, which he decided to leave after being wrong-footed by the election of Donald Trump as the US president late last year, which hit the investment performance of his funds.
Earlier this week, Soul Pattinson bought a 37 per cent stake in the privately owned Pengana, which is now proposing to merge with Hunter Hall. If approved, the deal will result in Soul Pattinson holding one-third of the enlarged group while Pengana's founder, Russel Pillemer, will have about 26 per cent.
Mr Hall's remaining stake in Hunter Hall will dwindle to around 7 per cent of the enlarged group.
While Soul Pattinson was negotiating to acquire equity in Pengana, which it bought earlier this week from National Australia Bank, Pengana itself had approached Hunter Hall to discuss merger possibilities.
![Peter Hall's stake in the company he founded will be diluted heavily if the merger with Pengana Capital proceeds.](/web/20170313010719im_/http://www.smh.com.au/content/dam/images/g/t/k/k/a/r/image.related.articleLeadwide.620x349.guuzvi.png/1489364587343.jpg)
Following Mr Hall's decision to quit the company and move on, Hunter Hall had appointed Moelis and Co to assess all of the options for the company given the fact that control of it could change hands, in light of the competing takeover offers on the table and the stated desire of Mr Hall to sell out.
Pengana said there are an estimated $6 million in cost savings to emerge as a result of the merger of the two entities, with speculation that Hunter Hall staff may be more exposed as the two companies are combined. Pengana has grown its funds under management rapidly over the past few years, during which time, Hunter Hall's funds base has stagnated.
The merger with Pengana means that Mr Hall's shareholding could now be easier to offload, since if it is sold in a single block, the buyer would not be able to gain control of the enlarged entity.
"Peter Hall is his own man," Hunter Hall chairman Kevin Eley said on Friday when discussing the merger proposal. Merging with Pengana will result in additional sharemarket liquidity which will "provide other alternatives for Peter [Hall]" when considering the sale of his holding, he said.
There is the possibility of a separate book-build being held for the sale of Mr Hall's stake, once the deal with Pengana has been finalised, although this could take some months yet to finalise.
Hunter Hall shares were ahead 5.4 per cent at $2.55 in closing trading Friday.