At the start of the week, fund manager Peter Hall's stake in the investment company bearing his name was worth $39 million. By the end of the week, he reckoned it wasn't even worth a third of that as he rushed to the exit, sealing a deal with Washington H. Soul Pattinson that could result in the conglomerate's takeover of the firm.
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"I am now 56 years old and it is time to spend more time with my family and following my personal interests," Mr Hall said in a personal statement filed with the ASX on Friday afternoon to explain his sudden exit, and outline the agreement he struck with the conglomerate.
Minutes before trading on the ASX closed for the year, Mr Hall said he had sold a 19.9 per cent stake in his company to Soul Pattinson for $1 a share, with the buyer agreeing to bid for all shares of the company for "at least $1 a share". At $1 a share, his holding is worth just $12 million. Mr Hall pledged to accept Soul Pattinson's offer for his remaining stock in absence of a better offer.
" I have known Washington Soul Pattinson for many years having first met patriarch Jim Millner in his office above the chemist shop in Pitt Street in 1985", Mr Hall said. "WHSP is a very fine Australian institution with diversified interests.
"Should WHSP be successful in their takeover bid, I feel confident that they would be good custodians of our investors' wealth."
Despite doing the deal with Soul Pattinson, it is believed there was a rival bid on the table at $1.15. It's not known why Mr Hall opted to take the lower offer.
"Peter Hall has prided himself on his ethical investment style," one finance industry source said of the deal. "Selling to a company which controls one of the biggest coal producers in the country has put the lie to that."
Soul Pattinson is the controlling shareholder in New Hope Corp, which owns coal mines in Queensland and NSW.
Poor decisions, departures
Hunter Hall Investments, which is 44 per cent owned by Mr Hall, manages several listed and unlisted funds, including Hunter Hall Global Value.
Its funds under management had fallen over the past few years following poor investment decisions and the loss of some key fund managers. One former director, Jack Lowenstein quit the company five years ago, establishing his own company, Morphic Asset Management. When he left, Hunter Hall had $1.7 billion in funds under management, which has dwindled to around $1 billion at present.
Trading in the company's shares had been halted for two days from December 28 after Mr Hall's surprise decision to quit as the firm's top stock picker, although he will continue as the chief executive.
When trading resumed on Friday, the prospect of a potential sale of the firm helped stem the extent of its share price decline, with the company's shares trading down 4.6 per cent at $3.10 before the market closed for the year. Allowing sharemarket trading to resume a matter of hours before Mr Hall sold a large chunk of his holding at just $1 a share is expected to spark investor anger.
Ahead of the announcement of the sale, Hunter Hall's board said it was fielding enquiries for the business, but the decision by Mr Hall to do a deal with Soul Pattinson has caught all parties off guard.
The company's chairman, Keven Eley said earlier on Friday there were "significant players in the investment management business with experience managing Australian and global funds" interested in buying the company.
"The board is currently assessing all options to maximise value for shareholders and ensure the continued stewardship of our funds under management," Mr Eley said in his statement.
Legal minefield
Mr Hall's sale - at less than one third of the price the shares were last trading at - has created a potential legal minefield for the board since the market may not have been fully informed of developments.
After his departure was announced at the start of the week, investment research firm Morningstar had placed its rating of the group's funds under review, citing the "very significant key man risk".
"While portfolio management at Hunter Hall was not under the sole responsibility of Peter Hall, he remained a very significant key man risk," Morningstar told clients on Wednesday. "We view his departure as a material change to the business and a risk for fund performance."
The group's funds have adopted a "fundamental value-based contrarian investment philosophy, with an ethical tilt", Morningstar told clients.
In the wake of the global financial crisis, some of the groups funds suffered a sustained period of underperformance with a loss of funds under management as well as the loss of some key fund managers.
"While Hunter Hall is improving it still needs an extended period of stability and consistency, in the near term," Morningstar said.
Mr Hall was expected to continue as chief investment officer until the end of his six-month notice period in June unless agreed otherwise, the board said in its statement on Friday morning.
