Earlier this year, it was announced that Perpetual would sell its corporate trust and wealth management businesses to KKR, leaving the asset management division behind.
The company has since entered into a plan of arrangement under which KKR will purchase its corporate trust and wealth management businesses for $2.1 billion. Perpetual will provide transition services to KKR for 18 months following completion, with the option to extend for an additional 12 months, and after that date the corporate trust and wealth management businesses will operate as standalone, independent businesses.
But during the company’s earnings call for the 2023-2024 fiscal year, an analyst raised the question of the possibility of a cancellation of the deal.
Since the deal was announced on May 8, Perpetual shares have fallen from $22.3 to $19.8, an 11 per cent decline compared to the ASX 200’s 3 per cent gains on the same period.
“What is the contingency plan if the project does not happen? Since this transaction was announced, the stock price has fallen significantly. Is there a time when the board or new management would consider pulling out of the transaction, and how complicated would it be to untangle it at that point? “, said the analyst.
A second analyst questioned the tax obligations associated with the deal and asked whether Perpetual was in discussions with the Australian Taxation Office.
Outgoing chief executive Rob Adams, who will be replaced this month by Bernard Reilly, said: “We are fully focused on completing the transaction.
“We are working towards the high end of the range and we believe this represents the right outcome for shareholders, especially if the work is done to ensure our asset management is fit to stand on its own. Our board of directors manages emergency plans. This is not the result we expect, but we manage them.
He said that even if the deal were to fall through – which he said is considered unlikely – Perpetual still believes it is best to operate its asset management, corporate trust businesses separately and wealth management.
“We realized that the revenue and expense synergies of the three parties would be quite limited and we had already decided to operate them independently even before the strategic decision with KKR.
“We saw no benefit in having them all together and that would be the route we would take.” Each of the three activities is high quality, but within the Perpetual envelope we didn’t feel like the value had been unlocked to the extent that we believe it is in them.
Last week, Perpetual reported a statutory after-tax loss of $472.2 million for the full year ended June.
The fund manager also recorded outflows of $18.4 billion in FY23 and FY24. This included net outflows of $8 billion from JO Hambro’s UK Dynamic and Global and International Select strategies and of $3 billion from TSW’s International Equity strategy.
