Pacific Current Group limited an Anatomy of a Disaster Part 1

Anatomy of a Disaster Part 1

Constructivist equity investment manager Advocate Strategic Investments (ASI) is keeping up the pressure on its investee company Pacific Current Limited (PAC), the former Treasury Group Limited, to explain how and why its November 2014 merger with privately owned US-based multi-boutique aggregator Northern Lights Capital Group and its partners, has turned out so differently to how it was “sold” to Treasury Group shareholders.

The merger was sold to Treasury Group shareholders as transforming both businesses into an international multi-boutique asset management group, combining 21 boutique asset management firms managing just under $50 billion, and delivering significant strategic and financial benefits to Treasury Group and its shareholders.

The merger was supposed to expand and diversify Treasury Group’s portfolio, improve Treasury Group’s access to capital and provide opportunities for increased distribution of Treasury Group’s boutiques into the US market. 

Very little of this has happened, says ASI. 

ASI’s research reveals that Treasury Group Limited took clean assets (without debt) into the merger, but swapped these for debt brought into the merger byNorthern Lights Capital Group. Further, that despite ostensibly being the majority partner in the Australian trust (Aurora Trust) that was established to hold the interest in the combined group’s 20 boutiques, Treasury Group effectively ceded control to its partner. 

ASI contends that Treasury Group’s board and executives failed dismally in their due diligence investigations into their merger partners. 

ASI further contends that details of the current structure of the Aurora Trust and the boutique investment managers it purportedly owns, as reported to Pacific Current shareholders and the Australian Securities Exchange (ASX), are at best, out-of-date; arguably, misleading; and at worst, deceptive. 

Further, ASI believes that the current company, Pacific Current Limited (PAC), is attempting to disguise the extent to which Northern Lights Capital Group hoodwinked it with deliberately opaque reporting and information. 

The merger with Northern Lights Capital Group has been a disaster for Treasury Group/Pacific Current shareholders, who have seen almost $96 million of shareholders’ funds burned in just 18 months – and their company’s market valuation fall by more than two-thirds. 

It’s not good enough, and ASI wants answers!

As a constructivist equity investment manager, ASI will be engaging with the board and executive of Pacific Current Limited more earnestly to suggest strategic, operational and governance changes that it believes could help the broader stock market to understand better the Pacific Current Limited business, and thus begin to redress the steep valuation discount currently being applied.

ASI maintains that both Pacific Current Limited and Aurora Trust are, as constituted at present, deliberately opaque with respect to their accounts and the operating performance of their assets, to the extent that shareholders cannot discover the true economic performance of their investment in Pacific Current Limited. Thus shareholders cannot have any confidence in the board and management of Pacific Current Limited with respect to redressing the dismaying loss of shareholder value since the company struck what ASI believes to have been a poorly thought-out merger. ASI has also questioned the scope of the company’s audit, and the independence of the auditors, given the related advisory fees paid to the firm in 2014-2015.

ASI will engage with Pacific Current Limited in a constructive manner. It will continue to seek answers to specific questions that have been put to the Company which has been mostly ignored and others as they arise.

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About ASI

ASI is a Melbourne-based independent investment management firm that provides institutional and sophisticated investor clients with customised alternative investment strategies. The firm’s senior investment team uses its unique, company-specific, value-oriented investment approach, with a strong focus on equity special events and credit opportunities. ASI’s approach is focused on the preservation of capital through extensive and rigorous investment analysis on a position and portfolio basis. ASI is the manager and adviser to the Advocate Partners Constructivist investment strategy. Shareholder constructivism is about advocating an owner’s perspective in relation to how a public company is governed and operated, in order to build the conditions necessary for its equity value to appreciate.

Disclaimer

This Press Release has been prepared by Advocate Strategic Investments Pty Ltd ABN 77 101 691 598 AFSL 224560 (ASI) for the information of shareholders. This release has been prepared from information available to ASI on the date of release and from publicly available sources. ASI has not verified this information and no responsibility is accepted for the accuracy, currency or completeness of this information. This release must not be taken to be financial product advice in respect of shares in the Company.

Advocate Strategic Investments Pty Ltd - ABN: 77 101 691 598 - AFSL 224560

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