ASX-listed global financial services firm Perpetual has announced that it has rejected a $3 billion takeover offer from Washington H. Soul Pattinson and Company (WHSP).
In its offer submitted on 21 November, WHSP proposed to acquire all of Perpetual’s shares by way of a scheme of arrangement and undertake a simultaneous demerger of Perpetual Asset Management, to be distributed in-specie to existing Perpetual shareholders.
Meanwhile, WHSP would have retained 100 per cent of the Perpetual Wealth Management and Perpetual Corporate Trust businesses in exchange for WHSP shares while assuming responsibility for all group net debt and stranded group costs.
WHSP said that its proposal implied equity value of $3.06 billion, comprising WHSP scrip worth $1.06 billion and Perpetual Asset Management scrip worth an estimated $2 billion.
This represents a value of $27.00 per Perpetual share, a 28.6 per cent premium to Perpetual’s undisturbed closing share price of $21.00 on 13 November.
“WHSP believes the indicative proposal provides a unique opportunity for Perpetual shareholders to unlock value in a tax efficient structure while retaining exposure to each of Perpetual’s three businesses,” the firm said in an ASX statement on Wednesday.
But later on Wednesday, Perpetual confirmed that it had received and rejected the “confidential, unsolicited, conditional, non-binding indicative proposal” from WHSP.
In a statement to the ASX, Perpetual explained that it had rejected the proposal because it “materially undervalues” the firm and its corporate trust and wealth management businesses.
Perpetual also suggested that the offer introduces “significant execution and operational risk over a protracted implementation period, and consequently may have negative value implications for Perpetual shareholders”.
“The board has, together with its advisers, carefully considered the indicative proposal and unanimously determined that it is not in the best interests of its shareholders and therefore has rejected it on the same confidential basis as it was provided to Perpetual,” the firm said.
In its statement, WHSP argued that it was “uniquely positioned” to partner with Perpetual to deliver value for shareholders and noted that it holds a 9.9 per cent stake in the firm.
“As a long-term investor in Perpetual, WHSP has a deep understanding of Perpetual and its individual business segments, which each have different characteristics and mostly operate independently,” WHSP said.
“WHSP believes the complexity of the Perpetual Group, together with the current market backdrop and Perpetual’s high financial leverage, is weighing on the share price and constraining Perpetual’s strategic flexibility.
“The acquisition would provide further diversification to WHSP’s portfolio and increase exposure to financial services. The indicative proposal demonstrates WHSP’s ability to unlock value through a creative, flexible and long-term approach.”
Earlier on Wednesday, Perpetual announced a strategic review of its corporate trust and wealth management businesses.
The firm said that it will be “exploring the benefits of unlocking additional value for Perpetual shareholders through separation of its corporate trust and wealth management businesses and creating a more focused asset management business”.
“The review is being progressed by Perpetual’s board of directors and is in line with the company’s regular evaluation of opportunities to create value for shareholders,” it said.
Jon Bragg is a journalist for Momentum Media's Investor Daily, nestegg and ifa. He enjoys writing about a wide variety of financial topics and issues and exploring the many implications they have on all aspects of life.