Washington H. Soul Pattinson (WHSP) has increased its stake in Perpetual from 6.66 per cent to 11.66 per cent less than a week after its $3 billion takeover offer was rejected.
A substantial holding notice to the ASX on Tuesday showed that WHSP acquired 5,666,727 ordinary shares in Perpetual at a cost of $141.7 million on 12 December. WHSP now ranks as Perpetual’s largest shareholder.
The filing also revealed that WHSP has entered into an equity collar arrangement and has an existing economic interest in 3,775,528 fully paid ordinary Perpetual shares. This amount, combined with the shares in which it has a relevant interest, amounts to an aggregate economic interest of up to 14.99 per cent.
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 per Perpetual share, a 28.6 per cent premium to Perpetual’s undisturbed closing share price of $21 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 last week.
But along with materially undervaluing the firm, Perpetual said that WHSP’s 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,” it said.
Perpetual, which completed its own acquisition of Pendal earlier this year, is currently undertaking 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.
Since WHSP’s takeover offer was publicly announced last week, Perpetual’s share price has increased by more than 7 per cent, closing at $25.60 on Wednesday.
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.