Perpetual’s confusing announcement about a deal to sell its Corporate Trust and Wealth Management units to Kohlberg Kravis Roberts dominated all the chatter amongst fund managers on the side lines of the Macquarie Australia Conference in Sydney on Wednesday.
The $2.175bn headline price seemed attractive, but as reported by The Australian, shareholders have no idea what the net proceeds will be, with separation and transaction costs, as well as a hefty capital gains tax bill, all undisclosed at this stage.
It’s left some describing the outcome as a shambles and wondering how a process running six months with three investment banks on board led to such a messy outcome, with a deal that requires a shareholder vote and won’t be finalised until next year.
The general view is that the Perpetual brand should never have been sold to KKR, and some are now wondering if an outcome is where major shareholder Soul Patts lifts its stake to 20 per cent and blocks the transaction in the vote.
And given the possible tax leakage and other costs, there’s a growing view that perhaps the units shouldn’t be sold afterall, and some are advocating for a demerger where there’s no tax leakage involved.
When Soul Patts bid for the business last year with its scrip and was rejected, the price was lower, valuing the Corporate Trust and Wealth Management assets at $1.885bn,, but sources say they would have taken care of the transaction costs.
All this at a time that the asset management business has had $10bn of outflows in the past six months.
DataRoom flagged on May 1 KKR was likely to pay about $2.1bn for the business after the column first revealed that KKR had entered exclusive talks to buy the business on April 19 and that it was named the preferred bidder.
DataRoom also first revealed that KKR was a bidder and firming as the contest favourite and in December, that it was in the race.
The sale comes as Perpetual announces Rob Adams would retire as the chief executive of Perpetual, and some believe board members should also go.
Should the deal proceed, it leaves the company as a pure play asset manager and likely now a takeover target, with Regal, Platinum or Magellan potential buyers.
Luminis Partners, Bank of America and Goldman Sachs advised Perpetual and KKR was advised by Jefferies Australia.
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