Howdy craft
Thanks for the really detailed response, much appreciated.
I think your line of thinking is very reasonable. As you said this is a fairly unique situation and I feel lucky that I'm not involved at this point because it's tricky (although could lead to a good opportunity).
I don't have a position in this one so I'm really just playing devil's advocate I hope you don't mind.
SOH have been running BKI ($1Billion LIC) for ages plus they are a conglomerate of long term investments.
Recently they externalized the BKI management relationship creating Contact Asset Management owned by Tom Millner, Will Culbert & SOH.
This is of course true. But BKI is an Australian only LIC. HHL's business has a decent portfolio of international based equities.
Perhaps this doesn't matter as much as I am assuming or there are people at BKI who have experience in this area and this is not immediately evident, but it feels like they're going outside of their circle of competence a little.
I suspect HHL will sit somewhere within a structure that has Contact overseeing investment management. HHL can continue exactly as it is with SOL replacing Peter Hall as effective owner of the business, perhaps at some stage SOH may make a realistic bid for the rest of the company and integrate HHL employees and funds fully into Contact – but it’s not necessary for the survival of HHL and SOL tend to be happy owning controlling stakes in listed businesses.
Peter Hall leaving does impact other but he has the right to do so. Selling at $1.00 only improves the position of others as it avoids the possibility of HHL being liquidated. If there was a run on funds because PH left and HHV traded at a material discount to NTA, liquidation would almost be a certainty without a major shareholder stepping into Peter’s shoes, and the $1.00 sale brought that shareholder into existence. It remains to be seen whether SOL gets the remaining 24% @ $1.00 – A part of the pricing on the initial 19.9% would be to give SOL the scope to bid up on the remaining 24% if they need to. They couldn’t privately buy the whole stake without going through a takeover bid.
I doubt that SOL will make a bid high enough to attract Minority shareholders. HHL have previously tried to sell the business as a whole but the tenure of Peter Hall has been a stumbling block, perhaps but not highly probable we get a bid for the whole company during the process of pricing PH reaming 24%. But if not Peter Hall is really just making a private transaction to see HHL remain as a going concern – Not sure if I worked at HHL I would see PH actions ensuring ongoing viability of the business as a kick in the face – probably the opposite.
If James McDonald and Jonathan Rabinovitz remain and SOH take effective stewardship of the business I’ll remain as a happy minority holder. The initial investment case was a small bet on PH – this development has the potential to be a much better funds management business.
I guess where I am coming from with the 'kick in the face' comment is from my experience business transitions, no matter how well you do them, rarely go smoothly. With HHL there is also the added context of the time from the beginning of the GFC until now which doesn't look at all like it was smooth sailing. I wouldn't suspect that it would take much for people in the organisation to get offended by Peter's actions (and they don't necessarily have to be interpreting them correctly in order to be offended or upset). That's just the nature of organisations that have been unstable. In that respect, I say this obviously as an outsider who knows very little.
Re the sale price at $1.00 and your comments re HHL operating with SOL just maintaining a controlling stake. I agree this would be the best outcome and it allows shareholders to continue to have exposure to the future economic outcomes of the business. Hopefully within a stable organisational environment.
I can honestly see upside in that if they can enact the right culture and allow the right people inside HHL to flourish. There's a lot of talented people in Australia in that respect if you give them the right environment.
My big issue isn't this, but it's the fact that by gifting WSP almost 20% at such a low price, they're in a position where they can leverage this stake and potentially takeover the whole company at a price which I am sure some minority shareholders would see as under their NPV. If the company is taken off the market in this fashion it also robs minority shareholders the chance to be exposed to the business in any shape or form.
I'm not sure if this was even possible, but if he wanted to sell at $1, isn't the best result finding a pro-rata way of offering this to all shareholders?
I guess at the end of the day it just feels like the elites/wealthy get opportunities that the small players can only dream of.
I have a lot of respect for Peter Hall; I think he probably thinks very much as I do. But a good investor does not necessarily make a good fund manager and he’s probably struggled for a while.
Two snippets from a recent article explain fully to me why he’s gone.
Yes, it certainly looks like he is disgruntled. He probably wasn't suited to running such a venture within a publically listed structure as this inherently takes away some of his advantageous personality traits.
Maybe he should have known in the first place, but there's been a hell of a lot of water under the bridge since then. Unfortunately for all involved we are now at the end game, and it had to come eventually.