Washington H. Soul Pattinson has left the door open to more opportunistic acquisitions such as the $3 billion bid it lobbed for funds manager Perpetual this week.
Chief executive Todd Barlow said the investment manager believed there would be more chances to invest in “undervalued” companies in the next few years, as businesses adjusted to how higher interest rates would affect balance sheets, and subsequently lower valuations.
On Perpetual, the Soul Patts CEO said persistent weakness in the target company’s share price encouraged it to increase its holdings in the company to almost 10 per cent.
The bid, which Perpetual believed undervalued its business, provided “diversification” and “increased exposure to financial services” for Soul Patts’ shareholders, Mr Barlow said at the company’s annual general meeting on Friday.
“It has been a pretty easy 10 years to invest in equity markets, as things have gone up,” he told a crowded room of shareholders at Sydney’s Establishment.
“That will not be the case forever. Those more discerning investors want good-quality investments that will outperform, and we are positioned to take advantage of these opportunities,” he said, adding that the company would “look out for opportunities like Perpetual”.
Soul Patts revealed it had $900 million in available cash, while the net asset value of its portfolio grew to $10.8 billion at the end of July, up $900 million from a year earlier.
During the 2023 financial year, the company conducted $3.1 billion in combined acquisitions and asset sales. Cash flow from investments spiked 22 per cent to $424.3 million.
A fully franked, final dividend of 51¢ per share brought shareholder dividends to 87¢, up almost 21 per cent from last year.
Shareholders welcomed Soul Patts’ remuneration report, and agreed to increase the maximum fee pool for non-executive directors to $2.75 million, from $2 million. The company also unveiled a rebranded website and logo.
After 12 years, Thomas Millner, son of Robert, said he would retire from the board at the end of the month.
No politics in business During an at times testy question and answer session, chairman Robert Millner dismissed some shareholder requests for greater payouts through special dividends.
“This was a big jump in one year. Shareholders will have been well rewarded … we would all like the company to grow as well,” he said.
Mr Millner was equally blunt in response to questions about Australia’s referendum on the Voice to Parliament, where the country voted No in October.
When asked about the company’s stance, he said it was “appalling that companies stuck their neck out” and publicised their opinions on the Voice. “We do not adopt any political views.”
Shareholders also asked the board why it wanted to provide debt to support Whitehaven Coal’s acquisition of the Blackwater and Daunia coal mines from BHP, which The Australian Financial Review’s Street Talk column revealed last month.
Mr Barlow denied a shareholder’s view that the decision to look at Whitehaven’s debt was outdated.
He stressed that Soul Patts’ interest was purely in the debt, and not an equity holding.
Soul Patts holds a stake of about 40 per cent in coal miner New Hope, which was tipped as a potential bidder for BHP’s Blackwater and Daunia mines, Street Talk reported.
“We know coal well … we have big exposure due to New Hope. We looked at Whitehaven from a debt perspective, so it’s more short-term in nature,” Mr Barlow told shareholders, who were concerned about Soul Patts’ exposure to fossil fuels.
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