Revolt … Gary Weiss, allied with a cabal of disaffected investors. Photo: Michele Mossop

THE first shot in the battle for Perpetual is about to be fired.

Corporate raider Gary Weiss is orchestrating a revolt against the board of the besieged blue-chip funds manager. Mr Weiss is to meet Perpetual’s directors to put the case for his election to the board to spearhead a corporate restructure.

His resume includes two successful financial services turnarounds: Tyndall group, which was sold for a handsome profit to Royal & Sun Alliance in the 1990s (now part of Suncorp), and Tower group, which was restructured and split up, again profitably. Tower Australia was sold to Dai-ichi Mutual in 2008.

Should his proposal to restructure Perpetual be rebuffed by the chairman, Peter Scott,and his co-directors, Mr Weiss is likely to call on the support of shareholders for a board spill.

Already he is allied with Washington H. Soul Pattinson’s chairman, Robert Millner, and a cabal of other investors who are disaffected with the bloated cost structure and lack of strategic impetus.

Despite its listless performance in recent years, Perpetual remains a glittering prize in Australian financial services, and one with hundreds of millions of dollars of value to unlock.

It boasts $23 billion in investment funds, $205 billion of client funds under administration and major shareholdings in most of Australia’s leading corporations.

Already, the US private equity vulture KKR has come knocking with a takeover bid pitched at $40 a share. That was a little over a year ago. Since then, the stock price has halved, star stock-picker John Sevior has defected to run his own

boutique, and only a week ago, the chief executive, Chris Ryan, left after a contretemps with the board. Mr Ryan was just one year into the job.

The chairman, Peter Scott, put Mr Ryan’s exit down to differences over the “execution of strategy for the immediate and longer term”.

”Over the weekend we agreed to disagree with Chris Ryan on these important issues and that he would leave Perpetual as a result,” he said.

Mr Ryan’s successor, Geoff Lloyd – an internal appointment elevated from the head of the wealth management business – quickly began enunciating strategy this week. “Critical priorities,” he said, were the “need to work harder and faster” to refine the group’s growth strategy. He cited cost reductions and asset sales.

Whether this is hard and fast enough is the crux. Figures from Perpetual last week showed a $600 million drop in funds during the December quarter. The momentum conspires against the prospects of an internal turnaround.

Culturally, Mr Ryan struggled to effect meaningful change. The view of disaffected shareholders in Perpetual is that the directors are paid too much, the funds managers and management both are paid too much, there needs to be a major overhaul of the business and the trust division needs to be spun off. This might fetch $400 million which is presently not recognised in the market value.

Sensing perhaps, that an external challenge could be in the wings, the board’s most recent management has gone on the front foot, foreshadowing cuts to 1450 staff by up to 20 per cent. The sale of the corporate trust business has also been mooted, as well as a host of other initiatives.

While former top funds manager John Sevior has been on leave and therefore avoided the worst of Perpetual’s travails – he recently announced his departure (despite being apparently still on the payroll) – his eventual defection is likely to see a further outflow of client funds.

Mr Sevior’s predecessor, Peter Morgan – who left years ago to set up 452 Capital – has been a vocal critic of Perpetual of late. It is unlikely that he features actively in the Weiss plans at this point.

Adding to the intrigue is Mr Sevior’s successor, Matt Williams, who is now the top funds manager at Perpetual. Mr Williams had a public fall-out with soon-to-be rebel shareholder Robert Millner last year after chiding Mr Millner for questionable corporate governance at Soul Pats, the company Mr Millner chairs.

Later in the year it was revealed by BusinessDay that almost 8 per cent of Perpetual’s shares on issue – mostly retention stock – was used to pay dividends to the staff although the staff had not yet become entitled to the shares as they had not yet vested.

This dubious practice is just another thing that Mr Weiss can point to when he brings his case to spearhead the regeneration at the venerable blue-chip institution.