The review, undertaken by Ernst and Young (EY), found that $14 million of the $15 million synergies claimed by Perpetual in its bid for TRU were supportable, with the implementation costs of the acquisition “conservative but based on recent successful delivery of cost reduction programs”.
It also found $7.5 million of the $11 million in synergies estimated by EQT were supportable, but that the implementation costs cited were not achievable.
“The implementation costs of one times synergies announced by EQT were likely to be insufficient given the scale, complexity and duration of the integration,” A TRU statement on the Australian Securities Exchange (ASX) said.
“With reference to the likely complexity of the required change to the business, the quantum of and time to realise the synergies, implication costs of 1.5 times the total synergies targeted may be a more appropriate estimate.
“At this stage, the board of TRU continues to believe the Perpetual scheme to be superior, and accordingly, continues to recommend the Perpetual scheme.”
In addition, the company said the scheme implementation agreement (SIA) with Perpetual remains in place.
TRU said that going forward it wants to fully evaluate the EQT proposal and requests the opportunity for a further review.
“Under the EQT proposal, TRU shareholders would effectively acquire 62 per cent of EQT, and hence a level of further evaluation is essential,” TRU said.
“Having regard for the findings of the full EY report, the board of TRU needs to better assess the more likely level of implementation costs, as well as whether there are additional areas of potential synergies not identified by EQT, which could be clarified by further enquiry.”
In particular, TRU said it wants to clarify factors affecting potential synergies, which include technology dependencies, execution capability and EQT’s capital position.
TRU has advised shareholders not to take action on the EQT offer until it has completed its evaluation.
