Regal Partners follows VGI merger with entitlement offer

Hot on the heels of its June merger with high conviction global equity manager VGI Partners, Regal Partners (ASX: RPL), formerly Regal Funds Management, has announced plans to raise $110m to fund future M&A activity, plus key growth strategies - after entering a trading halt earlier this morning.

As well as seeding a new private credit fund - the Regal Private Credit Opportunities Fund - management also expects funds to help further co-invest alongside wholesale investors into new and existing funds.

To help the group meet the demand from new and existing shareholders, Regal’s co-founder and CIO Philip King and the Regal Foundation have chosen not to take up their entitlements.

While the foundation may bid in case of any shortfall, any participation will be capped to ensure its stake does not exceed 19.9%.

Entitlement offer

The alternative investment manager plans to issue up to 42.3m new shares - representing around 20% of the total shares on issue – include a non-underwritten 1 for 5 pro rate accelerated non-renounceable entitlement offer.

The entitlement offer of $2.60 per share represents a discount of 8.6% to Regal’s closing price on 2 September of $2.84.

The one for five deal is expected to increase Regal’s market capitalisation to about $660m at the offer price.

Regal advised investors that the proposed capital raise will help to:

• Fact-track the execution of its diversified growth strategy

• Become a leading provider of alternative investment strategies

• Increase the free float and shareholder base

$5.1bn diversified platform

CEO Brendan O'Connor described today’s entitlement offer as an important milestone following the merger with VGI to form a $5.1bn-plus diversified platform of alternative investment strategies across hedge funds, private markets and real asset investments.

When the transaction settled in June, VGI investors received 33.3% of the merged Regal Partners, with former managing director and founder Robert Luciano taking 19.4%, while his former 2IC Doug Tynan held 5.1%.

Regal’s founding King family owned 42.5%.

"We are creating a leading provider of alternative investment strategies, and today's Entitlement Offer is an important and exciting step on that journey,” O’Conner noted.

Maiden financial result

The share price gained some albeit short-lived ground late August after posting an inaugural first half FY22 net income of $161.1m and $74m normalised profit after tax for the six months to June 30.

Highlights of the result included:

• Statutory 1H22 Net Profit after Tax (NPAT) attributable to Regal shareholders of $4.9m

• Pro forma normalised 1H22 NPAT attributable to Regal shareholders of $20.1m

• Total Funds Under Management (FUM) as at 30 June 2022 of $4.7bn

• No interim dividend was declared given the recent 39.7cps fully franked special dividend and growth opportunities ahead

Regal’s share price is down -55% over one year, and year-to-date has bounced from a high of $4.98 to $2.84.

Historical data

Source: FN Arena

Consensus does not cover this stock

Based on Morningstar’s fair value of $4.21 the stock appears to be undervalued.

Investors should note that the top 20 shareholders of Regal held 87.25% of shares on issue.

Regal Partners share price snapshot.