19/12/2007 - 22:00

From the archive: Sealcorp's $272m surprise

19/12/2007 - 22:00


Upgrade your subscription to use this feature.

Ten years ago this month, Perth entrepreneur Graeme Morgan collected a giant payout when he and his fellow shareholders agreed to sell one of Perth’s great business success stories for $272 million.

Ten years ago this month, Perth entrepreneur Graeme Morgan collected a giant payout when he and his fellow shareholders agreed to sell one of Perth’s great business success stories for $272 million.

Mr Morgan was a founder and major shareholder of Sealcorp Holdings, which grew rapidly to become one of the leading players in the national funds management and financial planning industries.

Its success was led by the Asgard master trust, an administration platform used by thousands of financial advisers to manage their clients’ superannuation and other investments.

Sealcorp’s success and the price paid for the business was extraordinary in anybody’s language – this was in 1997, long before billion-dollar mining projects and company takeovers became almost passe.

What made it all the more extraordinary was that Perth was home to not one but three large master trusts during the 1990s.

None is controlled in Perth any longer and only one of them, Asgard, operates under its original name.

The Sealcorp sale also had drama and legal intrigue, after four of Mr Morgan’s former colleagues took Supreme Court action to recover what they considered was their fair share of the proceeds.

Sealcorp started operations in 1985, initially with the Securitor dealer group and the Assirt research and software group, while the Asgard master trust commenced in 1987.

All three parts of the business were designed to make life easier for the financial planning industry, which was enjoying unprecedented growth after the Hawke government introduced compulsory superannuation in the mid 1980s.

Asgard’s growth was helped by the Assirt business, which provided links to advisory groups and fund managers across the country.

Crucially, Asgard struck deals with fund managers so that it could invest in superannuation funds at wholesale prices.

In 1997, when Sealcorp’s directors engaged corporate advisory firm Grant Samuel to sell the business, it had about $4 billion in funds under administration and earned a net profit of $9.9 million.

The successful bidder was St George Bank, which paid $22.57 per share, valuing the business at $272 million – much higher than had been anticipated.

St George outgunned rival bidder MLC, which had offered $17 a share.

Six months earlier, banking group County NatWest sold its 27 per cent stake at just $6 a share.

Mr Morgan was understood to have bought most of the County NatWest stake, lifting his total holding to about 40 per cent, worth $108 million in the eventual sale.

His co-founder, Bill Healy, held an 8 per cent stake, worth $21.8 million.

Other key players in the business included Tim Casey, Dennis Banks, Rose Goode, and John Nicholson.

They took legal action against Mr Morgan in 1998, claiming he had breached his fiduciary duty when he acquired a 9.5 per cent stake.

These shares had been owned by accounting firm Ernst & Whinney (now Ernst & Young), which acquired them in 1985 when it bought Mr Nicholson’s accounting practice.

Ernst sold the shares for 40 cents each in 1989.

It was claimed in court papers that the management group collectively acquired the shares, and that they were subsequently transferred to Mr Morgan. The dispute was settled out of court.

Mr Morgan has kept out of the public eye since selling his stake in Sealcorp.

His major interests include being a director of the Australian Wildlife Conservancy, and being a director and major shareholder of Melbourne-based Solar Systems Pty Ltd, which has invested more than $50 million into the development of solar concentrator (photovoltaic) power stations.

Mr Morgan is also the founder and trustee of the Wind Over Water Foundation, which funds conservation, medical research, arts, and social programs.

Asgard Wealth Solutions – as the Sealcorp business is now known – is headquartered in Sydney but most of its 700 staff continues to work in Perth, administering more than $37 billion in investment funds.

Rival master trusts established in Perth have not matched this success.

Accounting firm Bird Cameron established the Excelsior master trust in the late 1980s and, after just a few years, had $400 million in funds under administration.

The manager sowed the seeds of Excelsior’s demise – it accepted almost any asset, including art and antiques, but failed to invest in computer systems to keep track of all of the investments.

The manager closed the fund in 1993 and it was subsequently taken over by AM Corporation, which undertook a major restructuring.

Flexiplan, established by Sue Thomas in the early 1990s, fared much better.

It operated successfully through the 1990s and was acquired by MLC, which rebranded the fund MasterKey Custom in 2001.

MasterKey Custom currently has more than $11 billion in funds under administration and, like Asgard, is headquartered in Sydney but continues to be a major employer in Perth, with about 200 local staff running the business.


Subscription Options