The fact that Kohlberg Kravis Roberts remains in talks with Perpetual to buy its corporate trust and wealth management unit has raised hopes among investors that the private equity firm will lift its offer for the assets.
Last year it was expected that the private equity firm would walk away from the deal after the Australian Taxation Office said the tax bill on the sale would be $493m to $529m – far higher than the $106m-$227m that the company had estimated. As a result, shareholders will receive far less in proceeds – between $5.74 and $6.42 per share rather than $8.38 to $9.82.
Perpetual shares closed 8.4 per cent lower on the news, and there was talk that some shareholders would vote against the transaction at the earlier $2.2bn agreed price that the independent experts now say is not in shareholders’ best interests.
Now there are suggestions KKR is particularly eager to buy the business and will pay up. The market has rallied about 10 per cent since the deal was agreed to, which may encourage KKR in putting more money on the table.
If the deal collapses, Perpetual could sell wealth management to pay down about $500m of debt, with shareholder Soul Patts a possible buyer to add to its existing business.
Possible options on the table are to shelve the deal, for KKR to lift its price, for Perpetual to appeal the ATO decision, demerging the businesses, or KKR could bid for the whole business and sell the asset management business, then use US tax laws to get around onerous tax costs from an asset sale.
Last week, Perpetual said that in its second quarter performance fees rose and assets under management increased 3.6 per cent to $230bn, much of which related to currency movements.
However, outflows were $3.8bn or 1.7 per cent, which Bell Potter said was higher than its expectation of $2.2bn.
Corporate Trust funds under administration rose 2.5 per cent over the quarter to $1.25trn, which was seen as positive and higher run rate than the last few quarters.
Wealth Management Funds Under Advice rose 1 per cent to $20.6bn, driven by flat flows and positive market movements.
Perpetual shares closed down 30c to $21.45.
Healthscope firmly in the sights of Bain
Bain Capital is closing in on its next big target struggling with too much debt – the country’s second-largest hospital operator Healthscope.
Incitec Pivot’s fertiliser price likely too high for some
Potential bidders have been given information about Incitec Pivot’s fertiliser unit, but the jury’s still out as to how much they will be prepared to pay..