Earlier this year, it was announced that Perpetual would sell its corporate trust and wealth management business to KKR, leaving behind the asset management division.
The firm has since entered into a scheme of arrangement under which KKR will buy its corporate trust and wealth management businesses for $2.1 billion. Perpetual will provide transitional services to KKR for 18 months post-completion, with the option to extend for a further 12 months, and after that date, the corporate trust and wealth management businesses will operate as standalone, independent businesses.
But during the company’s FY2023–24 results call, an analyst raised a question about the potential for the deal to be reversed.
Since the transaction was announced on 8 May, Perpetual’s shares have fallen from $22.3 to $19.8, a decline of 11 per cent versus gains of 3 per cent by the ASX 200 over the same period.
“What is the contingency planning if the scheme doesn’t get up? Since news of this transaction came up, the share price has come off quite a bit. Is there a point when the board or the new management would consider pulling the transaction, and how complicated would it be to untangle at this point?,” the analyst said.
A second analyst questioned the tax liabilities associated with the deal and if Perpetual was in discussion with the Australian Taxation Office.
Outgoing chief executive Rob Adams, who will be replaced by Bernard Reilly this month, said: “Our full focus is on delivering the transaction.
“We are working towards the upper end of the range, and we believe it represents the right outcome for shareholders, especially if the work is done to ensure our asset management is fit to stand alone. Our board is managing contingency plans. It’s not the outcome we expect, but we are managing them.”
He stated 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, and wealth management businesses separately.
“We had a realisation that the revenue and expense synergies of the three parts would be quite limited and we had already moved to have them operate independently even before the strategic decision with KKR.
“We didn’t see any benefit in having them all together and that would be the path we follow. Each of the three businesses are high quality but, in the wrapper of Perpetual, we hadn’t felt the value had been unlocked to the extent that we feel sits within them.”
Last week, Perpetual announced a statutory loss after tax of $472.2 million for the full year ended June.
The fund manager also saw $18.4 billion in outflows during FY23–24. This included net outflows of $8 billion from J O Hambro’s UK Dynamic and Global and International Select strategies and $3 billion from TSW’s International Equities strategy.
