Perpetual currently has a Scheme Implementation Agreement with The Trust Company (TRU) that is subject to approval by the ACCC.
The ACCC expressed concerns about a Perpetual/TRU merger in a Statement of Issues published on 1 August, stating that the transaction could “further strengthen the position of Perpetual in the supply of at least some corporate trust services”.
In a presentation yesterday, IOOF noted that the acquisition of TRU would take Perpetual from $263.9 billion in funds under supervision (FUS) to $367.1 billion.
By contrast, IOOF currently has $32.6 billion in FUS, and Equity Trustees – which has itself made a number of unsuccessful bids for TRU – has $27.6 billion in FUS.
In other words, a Perpetual/TRU merger would see the largest player in the market purchasing the second largest.
IOOF managing director Chris Kelaher said the need for ACCC approval represented a major risk for Perpetual, whereas the IOOF bid offers TRU shareholders “more certainty”.
Mr Kelaher also revealed that IOOF conducted its due diligence on TRU back in May this year, but hadn’t made an offer because IOOF didn’t expect a Perpetual bid.
“Given the ACCC issues, we didn’t expect Perpetual to be participating,” he said.
Under the terms of the IOOF offer, TRU shareholders would receive their choice of 0.74 IOOF shares for each TRU share or a guaranteed minimum cash consideration of $6.03.
After taking into account a special dividend of 22 cents per shares and an interim dividend of 17 cents per share payable by TRU (something that is not included in the Perpetual offer) the value per TRU share is $6.73 for the IOOF share consideration and at least $6.42 for the IOOF’s guaranteed minimum cash consideration.
By comparison, the Perpetual offer sits at $6.06, according to IOOF.
For its part, Perpetual noted that under the Scheme Implementation Agreement it has with TRU, Perpetual has three business days in which to respond “should TRU consider any offer superior”.
