GLOBAL banking group JPMorgan is likely to sell its 50 per cent shareholding in Paterson Ord Minnett unless the local broking firm agrees to merge with Sydney-based Ord Minnett this year.
GLOBAL banking group JPMorgan is likely to sell its 50 per cent shareholding in Paterson Ord Minnett unless the local broking firm agrees to merge with Sydney-based Ord Minnett this year.
“I can’t tell you whether it’s more likely that we merge or that JP Morgan sell us, but it is likely that one of those things will happen,” Paterson Ord Minnett executive chairman Michael Manford told WA Business News.
“If we can’t merge, then I’m sure they will decide to sell their shares.”
The pressure to merge the two near-namesakes stems from the increasing brand name confusion in Sydney and Melbourne.
JPMorgan could dictate the outcome, since it owns 50 per cent of Paterson Ord Minnett and 40 per cent of Ord Minnett.
Its chief financial officer for Australia and New Zealand, Peter Corea, who is also a director of the two broking firms, confirmed that JPMorgan would like to see a merger.
“It would only strengthen the distribution capabilities open to us,” Mr Corea said.
“If that is not possible we would look at alternatives. We would like to have it resolved by the end of the year.”
Mr Manford acknowledged that a merger “would make good sense, it would be a powerful national retail operation up there with Bell Potter and Macquarie Retail”.
However, he is wary of losing management control.
“Paterson Ord Minnett really does want to control its own destiny,” Mr Manford said.
“We would have to end up with control over the merged group, which would be a very difficult outcome to achieve.”
The branding overlap first arose two years ago, after Paterson Ord Minnett ventured interstate with the opening of its Melbourne office.
Around the same time, JP Morgan acquired broking firm Dicksons and decided to use it as the platform for relaunching the historic Ord Minnett brand.
Paterson’s growing national presence, following its acquisition of Terrain Securities in July, has added to the branding tension.
“It does cause a level of frustration and brand name confusion in Sydney and Melbourne, which we would like to resolve,” Mr Manford said.
“It’s not such a pain for JPMorgan because between the two of us they have a big retail distribution network so it’s more frustrating from Ord Minnett’s point of view.”
If JP Morgan has to make a choice between the two firms, there is no doubt it would retain its stake in the Sydney-based Ord Minnett, which is about one third larger than Paterson.
The loss of JPMorgan as a 50 per cent shareholder would restrict Paterson’s ability to take on big transactions, though Mr Manford said Paterson had not drawn upon JPMorgan’s balance sheet backing on many occasions.
The upside for Mr Manford and his fellow directors, who include Aaron Constantine and Murray McGill, is that JPMorgan’s shares must be offered to management at a price equal to net tangible assets.
Mr Manford acknowledges that sentiment has played a part in his desire to retain local management control of Paterson, especially as 2003 was the firm’s centenary year.
There is also his parochialism.
“It feels good to be growing a national business from Perth,” he said.