Pacific Current Group Limited (PAC) Earnings Call Transcript & Summary

Good morning. I'm Tony Robinson, the Chair of Pacific Current Group and the Chair of this meeting. I'm delighted to welcome you all to the Extraordinary General Meeting of Shareholders at Pacific Current Group Limited. Thank you for your attendance today. I appreciate if all mobile phones or your mobile phones be turned off. We've got 1 person here for people on the line -- by the way -- well, I'm ignoring them. shareholders' representatives at the back there. So my apologies to them. The time has passed, 10:30, and as we have a quorum of members present, I declare the meeting open. I will now introduce our directors. Joining me today is our Nonexecutive Directors, Michael Clarke; and Gilles Guérin. Paul Greenwood, our Managing Director, CEO and Chief Investment Officer, is unable to join us today. Also joining us in person today is our CFO, Ashley Killick, and our Company Secretary, Clare Craven. Finally, our General Counsel and CCO David Griswold is joining us via the webcast. The agenda today's meeting is set out on your screen. Before commencing with the formal business of the meeting, I'll outline the procedures of the meeting, shareholders and proxy holders participating in person will be able to vote ask questions. Any shareholder proxy holder or visitor who is listening to the audio webcast will not be able to vote or ask questions. The notice of today's meeting dated, the 19th of March 2024 is made available to all shareholders on our webcast. I'll take the notice as read. I will now explain how voting and questions will work for the meeting. When you registered your attendance this morning would have been issued with an attendance card. Those with a blue card can ask a question and vote at the meeting. Those with the yellow card can ask a question, but not vote. Visitors with a white card are not entitled to vote or ask the question. The Board has determined that voting at this meeting will occur by way of a poll, so you have enough time to vote. I will shortly open voting and it will stay open until the meeting closes. As we formally put the 1 resolution we have today to the meeting, the proxy numbers received in relation to the resolution will be shown on the screen. The numbers will include votes on undirected proxies cast by me as Chair as set out in the notice of meeting as Chair. I will vote all directed proxies in accordance with the direction provided by shareholders and all undirected proxies in favor of the resolution. Today, we have appointed Julian Muzzin of Computershare, the company's share register as a returning officer. After the votes have been counted and reviewed by the returning officer of the results of the meeting will be released to the ASX and made available on our website. I now declare voting open. You can submit your votes to the returning officer at any time. Shareholders and proxy holders attending this meeting in person today will have the opportunity to ask questions about the resolution of this meeting. We ask you to keep your questions short and to the point. Once the resolution has been introduced at the meeting, you may wish to ask a question, please hold up your registration card. As Chair, I reserve the right to rule out questions that do not relate to the business of this meeting. Resolution 1. We now come to the formal business of the meeting. I'd like to start by giving you a brief background on the proposed transaction. In November last year, the company completed a strategic transaction process. As part of that process, the Board considered the future strategic direction of the company having regard to a number of factors, including valuable feedback received from our shareholders. Since then, we have been considering different opportunities which would be of great value to our business and shareholders. On the 15th of March 2024, PAC entered into agreements to externalize investment management by appointing an affiliate of GQG Partners to provide investment management services to PAC and also agreed to sell 3 boutique investments to another affiliate of GQG. As a result, the majority of PAC's U.S.-based employees, including the investment team led by PAC's Managing Director, Paul Greenwood, will become full-time employees of GQG, ensuring continuity while providing PAC with a significantly lower cost structure more appropriate to the nature of its portfolio going forward. PAC will appoint an affiliate of GQG to provide investment managers -- management services to PAC for 2 years with the possibility of extending the relationship upon mutual agreement. Paul Greenwood will act as portfolio manager and the PAC Board will continue to consider and improve all major portfolio and company actions. Paul Greenwood would step down from the PAC's Board at the time of the completion of the proposed transaction and finalization of the documentation related to the externalization of the management of the investments. This and the restructure of PAC's back-office function in the United States would mean an immediate net cost savings for PAC of approximately $6 million compared to the first half '24 on an annualized basis. We expect other savings going forward. PAC will receive 71 -- approximately USD 71 million for the sale of its boutiques. In connection with the sale of PAC's interest in Avante, one of those 3, the buyer will also be responsible for future deferred and contingent consideration payments outstanding as at the date of completion of the proposed transaction. PAC will also have the right, but not the obligation to invest in any GQG sponsored investment vehicles focused on GP stakes. Additional details of the resolution are set out in the notice of meeting. The Board considers the proposed transaction is in the best interest of the company for a number of reasons, including that it substantially reduces PAC's expense structure, the arrangements with GQG maintain continuity of the management of the current portfolio. It preserves optionality for PAC. It monetizes part of PAC's portfolio at an attractive price and PAC retains a portfolio of investments that have attractive value upside related to PAC's current share price. The Board, other than Paul Greenwood, who makes no recommendation on account of the fact that he is a Director of GQG, unanimously recommend shareholders vote in favor of the resolution. Each PAC director intends to vote all shares over which he or she has control or in which he or she has a relevant interest in favor of the resolution. As stated in the explanatory memorandum, the PAC Board is considering the most appropriate use of the proceeds from the proposed transaction together with receipts from the recent sale of PAC's investment in GQG. Shareholders would have seen an update provided to the ASX yesterday, advising of the company's intention to seek shareholder approval at another AGM likely to be in July 2024 to return up to AUD 275 million, possibly more of surplus capital to shareholders by way of equal -- and equal access off-market buyback. The Board believes an off-market buyback will provide most benefit to shareholders. PAC currently anticipates a buyback will be affected by the end of September 2024, subject to obtaining the requisite tax ruling and shareholder approval. Are there any questions on the resolution?

Brian Short, retail shareholder. I'm just wondering if you could give some indication in the information for this meeting and the press release last night, you're talking about there will be a substantial distribution by some means to shareholders, and I'm just wondering how you or your preferred option seems to be a share buyback, and I'd just like to put it out there, how will you determine the share buyback price? I can see that it can be done by the Board. It could be done by an independent directors or could be done by an independent expert. And I'm just wondering if you can give an indication of which path you might be going down.

Yes. That's a great question, Brian. And the answer is that it will ultimately be a shareholder decision. So we'll make the recommendation to shareholders about the quantum of the buyback and the price. The recommendation to shareholders will be a proactive, an independent party. We've actually appointed Flagstaff to help us with that. Jeff Kahn's here from Flagstaff. And then the independent expert will also come up with an opinion. We'll get another independent party to have a look at that. And -- but ultimately, the Board will be making the recommendation to shareholders. But the Board will be working with other parties to ensure that we're thinking about this in a full and complete way. It's a complicated question because it's both -- in some ways, it's a capital return, but it's also because of a number of reasons, it will be executed as a buyback, but it's also a buyback, and the buyback brings a slightly different lens to the question of pricing than the thought of a capital return, but also it's got lots of other things that feed into pricing. And a simple example of the other piece is the recent $11 offer, the fair value of the portfolio. The fact that the buyback will be all cash, which will leave people that are left in the business with completely different sort of asset base than the one at the start of the process. At the start of the process, it's roughly 50% cash, 50% subjective valuation at the end of the process, it's going to be 100% subjective valuation. How do we factor that into what's fair for both exiting shareholders and the continuing shareholders? They -- what price is likely to see is good enough interest in the buyback for us to be able to get that amount of cash to shareholders. So it is a complex thing for us to be wrestling with. And as I said, we'll be using external parties to help us get to a recommendation for shareholders and then the fixed shareholders will get to vote on it. Any other questions? Okay. As there's no other question, I'll now put the resolution to the meeting. The proxies received in relation to this resolution are shown on the screen. Please now select for, against or abstain for resolution 1. I'll pause to allow everyone to vote. [Voting]

All right. I think everyone is looking like they've done what they needed to do. So on that basis, we'll close the poll and close the meeting. Thank you for attending, and we'll be around afterwards if you've got any other questions. Thank you. So thank you, everyone.

Thank you.