Washington H. Soul Pattinson shareholders were told their dividends could be threatened and the company forced to sell assets if a restructuring put forward by dissident shareholders Perpetual and M.H. Carnegie wins support.
The dissidents want to narrow the gap between the sharemarket worth of Soul Patts and the value of its assets. Their complex proposal includes breaking the cross-shareholding between Soul Patts and Brickworks Limited and distributing to shareholders the shares held in TPG Telecom, one of the group's most successful recent investments.
"The nub of the problem" is the gap between the $3.5 billion market value and the $4.5 billion value of assets controlled by the group, Perpetual head of equity investments, Matt Williams, told shareholders at Friday's annual general meeting. "Why do we have that gap? Our proposal could be the first step in reducing that."
Perpetual has a 12.5 per cent stake in Soul Pattinson, which rises to 22 per cent if the Brickworks 42.7 per cent stake in Soul Pattinson is excluded.
Mr Williams said it was not Perpetual's intention to alter the board or the management. "You stay there and run the business. Our issue is not you [the board], but the valuation gap.
"We would all benefit if that gap were closed," he said.
The complex proposal would see Soul Patts emerge with $1.5 billion of debt but it had not "traditionally had debt at the parent level", said chairman Rob Millner. "It is unlikely [Soul Pattinson] would pay dividends with that debt," he said.
There would be a lack of franking credits and it was "unclear how the debt would be repaid", Mr Millner said.