Groups to duke it out for Perpetual’s wealth unit after KKR deal collapses

Perpetual has called off its $2.2bn unit sale to KKR, and is now working on Plan B. Picture: iStock

Private equity firms including Oaktree Capital Management and TA Associates have been named as potential suitors of Perpetual’s Wealth Management arm.

The business is now on the market after a deal to sell it to Kohlberg Kravis Roberts with Perpetual’s Corporate Trust unit has collapsed, with the pair unable to agree on price.

TA Associates is known to have been searching for opportunities in the financial services space in Australia.

However, sources say that the US-based buyout fund has already looked at the division of Perpetual for a purchase but has opted to move on.

Meanwhile, Perpetual’s shareholder Soul Patts is also understood to have looked but later cooled on the opportunity.

Other potential suitors are JBWere, Crestone, Viridian and Koda Capital.

Perpetual told the market on Monday it had terminated its deal with KKR, which had earlier seen the buyout fund paying $2.2bn for its Corporate Trust unit.

However, since the sale was first agreed, Perpetual has learned that the tax bill is more than earlier anticipated – $493m to $529m, higher than the $106m to $227m predicted.

As a result, shareholders would receive far less in proceeds – between $5.74 and $6.42 per share rather than $8.38 to $9.82.

Now, KKR is in dispute with Perpetual about the payment of a break fee, which the listed group says it does not need to pay.

KKR has come forward with revised proposals, but Perpetual’s board has determined they are not in the best interests of shareholders and talks have ended.

It said it would continue “executing on the business separation program” but stopped short of saying it would demerge Corporate Trust.

Perpetual said Wealth Management was a quality, highly regarded business with a broad service offering to high-net-worth clients as well as leading fiduciary and Philanthropic offerings.

Market experts estimate its value at somewhere between $500m and $1bn, and a sale could help Perpetual retire its $450m-odd debt load.

Proceeds from a planned sale would be used to strengthen the group’s capital position, as well as support investment in organic growth in both Corporate Trust and Asset Management.

Moves to sell and separate Corporate Trust and Wealth Management has cost the company $42.6m last year, including fees to advisers Goldman Sachs, Bank of America and Luminis Partners.

Meanwhile, Perpetual’s chairman Tony D’Aloisio is stepping down to be replaced by Gregory Cooper.