Here are my full notes:
Tax leakage – some leakage, but not that much. Simplification and merger has allowed for greater tax savings than normal (IML capital base was increased therefore capital gain liability will be lower than analysts anticipate).
IML (Anton T) approached the board and sounds like there was a capability and how much are you going to pay auction. Final decision was to go with Natixis by IML. My interpretation of words “The purchase would have committed PAC to build new capabilities that would expose shareholders to unwanted liabilities (assuming IML want increased distribution capabilities in a part owner)”.
12 times earnings over the 2017 financial year…. Assume $10 Million earnings at a sale price of $120 Million.
Reluctant sellers, price was fair for a good business.
Re-allocation of capital to new opportunities, liabilities and dividends.
PG talked about new opportunities:
-Has opportunities across multiple geographic locations
-Won’t relax criteria to invest just because PAC has capital (about 8 times earnings)
-Looking at 150 to 200 opportunities per annum
-Particular emphasis, diversify revenue streams to spread earnings
A couple of opportunities in Australia. It is unlikely that these will be next opportunity, overseas are of higher quality and provide greater returns.
Trying to minimise decreases in FUM.
Re-deploying capital at 8 times earnings.
IML sale price is on par, if not better multiple than RARE sale.
Board needs to sit down and review tax implications. The simplification enabled IML capital base to be increased therefore reduces tax liability.
If the board is not confident they can deploy capital at a reasonable price then they will return in dividend.
Cash comes in
4/10/2017 and $10 Million is escrowed over 18-24 months.
Liabilities will be reduced, remaining will be deployed to dividends if a reasonable purchase can’t be found.
Clarity on how the proceeds will be deployed will be made certain by the time of the AGM.
Steven Atkinson from Adam Smith:
-What purchase terms were considered to buy?
oPAC considered to buy or sell, ultimately Natixis were the preferred bidde.
-Time to review?
oWithin weeks, not months, this financial year when Tony back from Annual Leave
Analyst questions:
-Are there opportunities to deploy more capital into existing businesses?
a) Answer is yes if the right opportunity is available
- Do the funds available Increases Put/Call options with the remaining RARE stake.
a) Provides flexibility on the Legg Mason. PAC can hold for longer for RARE FUM to improve.
-Any financial benefit in paying liabilities early?:
a) Yes, paying XRPU liabilities is a high benefit due to higher rates triggered if not paid by specific date.
-What is to be done with funds paid ($110 M). Poked at PAC Team that the capital would be a higher earner in the bank at 2.5%, compared to some of the Funds PAC owns.
a) as per previous, high returning investment and liability payment first and then return of capital to shareholders through dividends.
-Will this have a positive or negative impact on earnings:
a) It will have a negative impact on earnings, the impact will be known at the AGM. Interest expense savings by paying current liabilities are not greater than return from IML.
-Timeline to deploy cash (if there is one)
a) Answer was indirect on time, only if there is an opportunity that meets metrics of investment
Investment range opportunities are between $50 Million and $150 Million
Best of Luck
Lost
(20min delay)