Northill Capital picked to buy Hastings

03 November 2017 - 12:00 am UTC

UK-based asset manager Northill Capital has acquired Hastings Funds Management from owner Westpac Bank after a painful sale process that lasted more than 18 months.

Westpac and Northill Capital announced the Hastings deal in a statement on Friday (3 November) afternoon.

They would not disclose the price, but it is understood it is around AUD 160m (USD 123m).

The decision comes after two previous attempts by Westpac to sell Hastings. In March 2016, US pension fund TIAA-CREF and pension fund manager Massachusetts Mutual Life Insurance Company pulled out just before bids were due. Then in August listed property manager, Charter Hall Group, ended exclusive due diligence.

Northill Capital was set up in 2010 with backing from the Bertarelli family. It has about USD 48bn in assets under management and five other “single-purpose” asset management businesses. The Bertarelli family made its wealth in pharmaceuticals and the biotechnology sector.

Northill has not had any investments in infrastructure before, but has been looking to buy an infrastructure fund for some time.

Founder, Jonathan Little, told Hastings’ staff on Friday Northill had been interested in acquiring a stake in Hastings for two years and sought to assure them that it is a long term holder of the business.

“We are not a consolidator, we are not an aggregator, we don’t buy businesses to strip out costs and we certainly don’t utilise financial engineering – in fact we don’t use leverage of any description in our acquisitions – and we certainly don’t buy businesses with a quick exit in mind,” he said in a letter.

Charter Hall Group, Lendlease and Macquarie Infrastructure and Real Assets were also understood to be looking at purchasing Hastings in the third sale process.

However, investors in Hastings managed funds were understood to be unhappy with the choices on offer and HRL Morrison & Co was put forward at a late stage as a preferred alternative owner by investors.

HRL Morrison declined to comment.

The deal includes a requirement for Hastings’ management to invest alongside Northill.

It is understood this has initially been set at around 10% of the fund, but could rise higher in future. However, the details of the required investment have yet to be discussed in full between Hastings and Northill.

There is thought to be a lot of relief at Hastings that it will now be free of Westpac ownership after 15 years and the uncertainty that surrounded the drawn out sale.

It is still uncertain, however, whether some Hastings’ investors – including those who back Hastings’ biggest fund, the AUD 6bn Utilities Trust of Australia – will accept the new owner as Northill is not well known in Australia.

One of Hastings’ biggest mandates, The Infrastructure Fund, is already seeking a new manager. UTA and other owners of assets managed by Hastings, including State Super, were understood to be seeking new managers prior to the selection of a new owner.

HESTA, one of the super funds with investments in UTA, declined to comment.

However, sources close to Hastings say investors have been consulted throughout the process and as part of the deal, terms in Hastings’ mandate agreements, some of which are more than 20 years old, will be updated and lower fee structures are being discussed.

Little will be visiting Australia next week to meet Hastings managers and staff and he and other Northill team members will be be meeting investors in Hastings funds to try to convince those that still have misgivings to keep Hastings as their fund manager.

Some market participants have suggested it may be a costly exercise for the investors to switch to a new manager.

Regulatory approvals are expected to see the sale take up to three months to complete.