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The passive funds followed the recommendations of Australia-based proxy service companies and, if the takeover had succeeded, that would have been “a funny outcome when a better outcome could be achieved”, according to Michael Sherrock, Nikko’s co-head of equities.
The bidder, a consortium of US-based Sixth Street and Australia-based BGH Capital, had offered $1.34 per share for Pushpay, valuing it at nearly $1.53 billion, but that was near the bottom of Grant Samuel’s independent valuation of $1.33 to $1.53.
Concerted opposition by local active fund managers, including Nikko, ACC, Fisher Funds, ANZ Investments and the NZ Superannuation Fund, meant the vote failed to reach the 75% threshold required for the takeover to succeed.
Of the shares not owned by the bidders, only 55.5% were voted in favour.
NZX-owned Smartshares did vote to accept the offer and confirmed it had acted on the recommendation of Glass Lewis, but the other proxy services company, Institutional Shareholder Services, had also recommended acceptance.
Sherrock said he didn’t know whether passive fund managers could have chosen to reject proxy companies’ advice.
“I guess their job is to track an index,” Sherrock said at a Nikko presentation for advisers in Auckland last this month.
He was critical of the Pushpay directors too for accepting the offer too easily, instead of first sounding out institutional investors as to what an acceptable price might be.
The bidders have since come back with a new offer of $1.42 per share, valuing the company at $1.62b.
“We’ve signalled our intention to vote in favour of that, as have a number of other institutional investors,” Sherrock said.
That price “isn’t a knock-it-out-of-the-park type price” but there are a lot of hedge funds on the register.
In the absence of a successful offer, they would have been forced sellers of Pushpay shares, meaning the share price would have been under pressure for a period.
But the passive fund managers “are able to effectively piggy-back off the hard work that active managers have done”.
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