Race for Perpetual wealth unit narrows to Oaktree and Bain Capital

The sale of its wealth management arm will reduce Perpetual’s debt, currently at about $569m.

The competition to buy Perpetual’s wealth management unit is understood to have narrowed to just Oaktree Capital Management and Bain Capital, with TA Associates now believed to be out the race.

Boston-based Bain Capital surprised some in the market by bidding for the company in the first round of the sale process, after many expected it to be a race between TA Associates and Oaktree.

But now it appears to be shaping up as a serious contender.

Working on the sale process for Perpetual is investment bank Barrenjoey.

Oaktree, working with adviser Jarden, purchased a major stake in professional advisory firm AZ NGA for $240m last year.

TA Associates is known to have been scanning the Australian market for opportunities in the financial services space for some time.

Bain Capital has made its interest in wealth management businesses well known by bidding for Australian-listed Insignia Financial.

However it withdrew its early $5 a share offer after Brookfield also walked away following a bid for the same price that equated to a $3.35bn market value.

CC Capital has also carried out due diligence and offered $5 a share for Insignia, but there’s some talk that securing debt funding for a deal could be an issue and it may not complete, or do so at a lower price.

Shares in Insignia closed at $3.60 each with its market value at $2.38bn.

First round bids were due at the end of May for Perpetual Wealth.

Perpetual is selling its wealth management unit after an attempt to sell its Corporate Trust unit and wealth business to Kohlberg Kravis Roberts last year for $2.2bn.

That deal stalled with the ATO demanding a larger-than-expected capital gains tax bill.

That sales process happened after Perpetual received buyout approaches, and after it purchased rival Pendal for $2.5bn in 2023.

In the past year, Perpetual has appointed a new chief executive, Bernard Reilly, and chairman Greg Cooper.

The sale of wealth management will reduce Perpetual’s debt, currently at about $569m.

The unit is expected to sell for between $500m and $1bn, but some have suggested that the price some suitors want to pay is closer to $400m, although competitive tension could provide firepower for the auction.

The wealth management unit generated underlying profit before tax of $29.2m for the six months to December, up 12 per cent on the previous corresponding period.

Its funds under advice for the six months to December was $20.6bn, which was an 8 per cent increase on the previous corresponding period.

Perpetual provides a range of investment management, superannuation, and retirement income products and services to the retail, wholesale and institutional markets through its wealth management arm.

Private equity firms are becoming increasingly interested in the private wealth sector, with a wealthy, ageing population and superannuation industry driving returns.

Wealth management generates about 17 per cent of Perpetual’s overall revenue.