Storied Australian global equities fund manager, Platinum Asset Management, recorded a milestone moment last week as founder, Kerr Neilson, sold most of his remaining stake in the business to hedge fund operator, L1 Capital, ahead of a potential merger.
In a release, L1 Capital confirmed it had acquired “a 9.6% shareholding in Platinum by way of an on-market purchase” from Neilson with a path to reaching almost 20 per cent under a call option to buy “part of his remaining” stake in the firm.
L1 Capital also lobbed a merger bid after acquiring the Neilson stock to create an A$18 billion combined funds management entity.
Under the proposed terms, “L1 Capital shareholders would own around 75% of the shares in the combined entity and current Platinum shareholders would own around 25% of the shares in the combined entity”, the release says.
Mark Landau and Raphael Lamm, L1 Capital co-founders, labelled the mooted merger as a “compelling value proposition for Platinum shareholders”.
“L1 Capital brings a strong investment track record and a loyal, diverse and growing investor base. This has allowed L1 Capital to grow profitably over many years and successfully launch new funds and strategies,” the pair said in the statement.
“Platinum has been one of the pioneers of global equities investing since the 1990’s, with a strong brand and diverse client base. We expect the combined business to benefit from improved resourcing and capabilities across investments, client service and operations, as well as increased diversification across investment strategies and distribution channels”
Neilson grew Platinum from scratch to become one of the largest fund managers in Australia with a long-short global equities style that won favour with investors and financial advisers on both sides of the Tasman.
As recently as 2020, Platinum reported about A$22 billion under management but after a run of poor performance and outflows, the figure has more than halved to A$10.3 billion at the end of March.
While Neilson retired as Platinum chief in 2018, investors welcomed his continued presence on the share register.
Current Platinum CEO, Jeff Peters, confirmed in a release that merger talks were underway, noting that L1 Capital was “a first-class manager with a strong investment track record”.
The proposed tie-up “provides an attractive opportunity to combine expertise and resources, and we will continue to explore if it’s in the best interests of Platinum shareholders”, Peter said.
Another Australian hedge fund player, Regal Funds Management made a play for Platinum late last year before abandoning talks this February.
The latest Platinum news comes after several other big-name 1990s-era Australian fund managers have gone down the merger route in recent years.
For example, Perpetual merged with Pendal (a successor brand of the iconic BT Funds) in 2023 while last year Antipodes Partners bought Maple-Brown Abbott – an Australian boutique on a par with Platinum back in the day.
Also in 2023, the once-mighty Australasian funds manager, AMP Capital, disappeared as its ASX parent sold off the business in parts.
Meanwhile, the manager that replaced Platinum as the go-to global equities option for Australian and NZ advisers from about 2008 to 2021 – Magellan – has seen assets under management almost quartered from its peak.
Magellan reported A$38.6 billion under management at the end of February on monthly net outflows of A$0.5 billion, well down from the late 2021 high of about A$116 billion.
Under the leadership of Andrew Formica, Magellan has steadied outflows while taking an almost 30 per cent stake in Australia-based ‘systematic’ manager, Vinva, last year.
The Platinum share price bumped up more than 6 per cent on the merger news to close on Friday at almost A$0.68.