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Soul Patts’ Rob Millner squares the circle as he comes for Perpetual

Jemima Whyte (Australian Financial Review), Dec 8, 2023

It’s hard to resist the idea that this week’s $3 billion bid for the storied fund manager doesn’t come tinged with some layer of revenge.

“He gets a combination of money and vengeance.”

That’s Mark Carnegie’s take on the move made by Robert Millner, chairman of investment house Washington H Soul Pattinson, on Perpetual, the storied but embattled funds management and wealth and corporate trust business.

It’s a tempting summary, offered by the man who spent years alongside Perpetual fighting – ultimately unsuccessfully – to unwind a cross-shareholding between Millner’s family company, Soul Patts, and Brickworks, a building materials group. That structure, critics would say, has made any takeover or change of control almost impossible.

It can be hard to resist the idea that Soul Patts’ $3 billion offer for Perpetual doesn’t come tinged with some layer of revenge, particularly as Soul Patts rides high after successful investments in coal and credit while Perpetual sags under high debt levels and acquisitions.

Robert Millner is the chairman of Soul Patts and sits on the boards of many companies which the investment house has stakes in.

Millner, 73, who grew up on Sydney’s north shore and a farm in central-western NSW, is frequently cast as an old-style patriarch, an investor who rejects trends such as working from home or selling out of coal on ESG grounds, preferring to focus on increasing dividends and long-term investments.

But others say revenge isn’t likely to be a motivating factor at all.

“I just see the highly intelligent business brain that’s seen an opportunity,” says Wilson Asset Management’s Geoff Wilson, of the move on Perpetual. “The group focused on short-term performance is nearly getting gobbled up by the company that has shown it can deliver over the long term.”

Millner is the fourth Millner family member to run Soul Patts, the country’s second-oldest listed firm.

Started as a pharmacy business, it now has a sprawling investment portfolio from Brickworks to New Hope, a coal producer, TPG Telecom, Pengana Capital and BKI Investments.

Millner is on the board of all those companies, except Pengana, where Brendan O’Dea is a director. If that’s not enough board seats, Millner is also a director of two other companies in which Soul Patts has shares: copper producer Aeris Resources and Singapore telecoms group Tuas Limited.

Millner has been on the Soul Patts board since 1984 and chairman since 1998. His son, Tom Millner, joined the board in 2011. During that time, the group has also made investments in private capital and credit, two areas that are tipped to expand along with international holdings.

As well as being regarded as a conservative, long-term investor, Millner – who has been a regular attendee at Berkshire Hathaway meetings over the years – also has a reputation as a tough businessman.

“He’s obviously old-fashioned and set in his ways ... but he’s not as tough as his uncle, Jimmy, who was a prisoner of war in Borneo,” says Peter Morgan, Perpetual’s former head of equities and an investor in some of the Millner family-backed companies.

Morgan says the ability to withstand market fads has worked for the Soul Patts group. “Souls is almost the flipside of corporate governance going mad in Australia ... it’s the old style winning out,” he adds.

Take its coal investments. For some time, best practice was considered divesting – a trend Souls ignored. More recently, some investors prefer to keep coal in the portfolio and be part of a responsibly managed decline.

Still thinking about revenge rather than rational investment decisions? Long-term followers of Soul Patts recall the bidding war for Trust Company of Australia, which pitted Perpetual against Equity Trustees. While many expected Soul Patts to support Equity Trustees, they did the opposite and chose to go with the highest offer.

‘He’s proved his point’

Soul Patts might be conservative, but it’s not stagnant. It has purchased a listed investment company, Milton Corp, and refreshed the board, bringing on former Wesfarmers executive David Baxby just this week.

In September, the company said it had reallocated nearly $1 billion of capital into private markets over the past year, diverting it from equities. It now has a private equity portfolio worth $1.2 billion, and at the end of June, a cash and term deposit balance of $911 million. The group reported net profit jumped to $690.7 million from a loss of $12.9 million the year before.

At Perpetual, it’s another story. This week, it told shareholders that it was mulling a “separation of its corporate trust and wealth management businesses and creating a more focused asset management business”.

The company, which has rejected Soul Patts’ $3 billion takeover offer and says it materially undervalues the group, acquired rival fund manager Pendal last year. It was the target of an unsuccessful $33 per share takeover bid from Phil King’s Regal Partners and its private equity partner, EQT BPEA. Since then, its shares have slumped and investors are unhappy.

“He’s proved his point: a long-term structure creates more value than short-term focus,” says Carnegie of Millner. “He’s been able to ride out returns and been to hell and back with coal. The virtues of conservatism aren’t to me all washed out in conservative times.”

But those who speak of the success of Soul Patts also point to its chief executive, Todd Barlow, who drives the investment strategy, while Millner sets the tone and investment culture with a supportive board.

Like Millner, Barlow is a long-term investor. Unlike Millner, who is an avid supporter of rugby and the Wallabies, Barlow prefers US sports.

Kevin Eley, who was on the Milton board when it was acquired by Soul Patts and is now a Pengana director, says Millner and Barlow are clear thinkers. That’s how Millner behaves on boards, too, he says. Investment committee meetings ran for a maximum of one hour. “When Rob ran them there was no flipping and flapping, we’d decide and move on,” he says, adding that Barlow’s presentation about the benefits of the Milton deal was impressive.

He also reflected that dealing with Soul Patts tended to be straightforward, polite and unlikely to end up in the media.

Eley also spent time with Millner at the Rugby World Cup this year in France. He says it wasn’t unusual for Millner to be on a call with Soul Patts in the middle of the night and turn up for lunch “bright as a button”.

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