Perpetual in focus amid KKR sale talks

Perpetual CEO Rob Adams in Sydney. Picture: Nikki Short

Perpetual may provide further insight this week into its strategic review, with Kohlberg Kravis Roberts now understood to be in exclusive talks for a $1bn-plus acquisition of its Corporate Trust and Wealth Management units.

DataRoom revealed online on Friday that Perpetual had won the right to negotiate with the Australian listed financial group exclusively, after earlier reporting it was firming as the favourite in the competition to buy the assets.

But the financial services market is keen for insight also into KKR’s plans for the businesses, should it be the successful suitor.

The theory circulating last week was that the business would be integrated into its Colonial First State wealth management operation that it jointly owns with CBA, buying 55 per cent in 2020 for $1.7bn.

However, sources speaking on behalf of the buyout fund have dismissed this as being the case.

The New York-based buyout fund has also fended off suggestions that it will sell the CFS business in the next two years, despite some saying growth rests on mergers and acquisitions.

It’s not the first time KKR has bid for Perpetual – it lobbed an all company offer back in 2010 for $1.75bn, but it never got off the ground.

Last time, Perpetual’s Wealth Management clients had plenty to say on the mooted acquisition and this time around, it is seen as something the New York buyout fund will have to manage if it is successful in buying the business.

Market experts believe that the upside for KKR will be in growing the Corporate Trust unit, with few synergies between its operations and Perpetual Wealth Management.

One idea is that KKR could replace Perpetual’s white label wrap product with the CFS Edge wrap platform, and there could be an opportunity to reduce costs by bringing in its own staff.

KKR, advised by Jefferies Australia, has come out as the frontrunner after ousting Barrenjoey-advised EQT, which is partnering with the Morgan Stanley-advised TA Associates that wanted the wealth management unit, and Permira.

Perpetual, led by Rob Adams and carrying $734m of debt, has been running a sale process to determine whether to part with the Corporate Trust and Wealth Management divisions and final bids landed before Easter.

Luminis Partners is working for Perpetual’s board, while Goldman Sachs and Bank of America work for the company.

The strategic review coincided with a scrip buyout proposal late last year from Soul Patts it claimed would value the group at $3bn or $27 a share.

Corporate Trust, Australia’s largest provider of corporate trustee services and transaction support, generated earnings before interest, tax, depreciation and amortisation of $46.5m for the six months to December.

Soul Patts said it would acquire all of Perpetual then simultaneously demerge Perpetual Asset Management and distribute it in-specie to existing Perpetual shareholders.

Soul Patts would then retain Wealth Management and the Corporate Trust arm in exchange for Soul Patts shares.