Market bets Perpetual’s tie-up with Pendal on the rocks

Investors are betting Perpetual’s plan to buy rival fund manager Pendal could fall over, even as it continues to fend off takeover interest from Regal Partners and private equity firm BPEA.

ASX-listed Perpetual on Thursday rebuffed a sweetened $33-a-share bid from Regal and BPEA and said it had received interest from other unnamed parties.

The news sent Perpetual’s share price surging 15 per cent to $33.40, piling more pressure on its board to engage with the suitors.

The private equity players are out to disrupt Perpetual boss Rob Adams’ plans to acquire Pendal.Credit: James Brickwood

The takeover interest in Perpetual comes amid market scepticism over its plan to merge with Pendal - a deal that was agreed to in August.

Pendal believes it still has a firm deal with Perpetual, which it could try to enforce in court if necessary. Pendal’s chief executive Nick Good last week said: “We have a legally binding agreement with Perpetual, that’s not going to change.”

However, Perpetual has signalled to the market that it believed it could back out of the Pendal deal if it was in the best interest of its shareholders. It would face a penalty of up to $23 million if it abandoned the merger.

Big moves in both companies’ share prices on Thursday also implied the market was betting the deal was on shaky ground, and Perpetual was in play. While Perpetual’s shares bounced, Pendal shares dropped 10.9 per cent to $3.91.

Morningstar analyst Shaun Ler said the share price movements were a sign the market was expecting the Pendal acquisition would not go ahead, and that Perpetual was better off without Pendal.

Ler raised the prospect that Perpetual may consider selling other assets to realise shareholder value, if it wanted to proceed with the Pendal deal. “If it wants to buy Pendal it will need to so something to convince its shareholders it can deliver value in some other way,” he said.

Perpetual’s board on Thursday said it needed to fulfil its fiduciary obligations to shareholders, and had therefore sought to delay a court hearing for the scheme of arrangement, which is a type of legal agreement, being used to implement the merger with Pendal.

Meanwhile, Pendal said it was opposed to any delays and believed it could force Perpetual to complete the transaction through a court if needed.

The legal dispute comes after Perpetual emerged as a takeover target of Sydney hedge fund Regal, led by Phil King. Regal’s chief executive Brendan O’Connor said the parties bidding for Perpetual were confident there was no legal impediment to Perpetual engaging with the consortium.

“We are deeply disappointed by the decision of the Perpetual Board to reject the improved proposal,” O’Connor said.

Some analysts have been sceptical of Perpetual’s plan to merge with Pendal, arguing last week that Perpetual should engage with Regal to seek a higher price for shareholders.

MST Emerging analyst Lafitani Sotiriou, a critic of the Pendal-Perpetual deal, said in a note the latest Regal bid was more realistic than last week’s offer.

Meanwhile, fund manager Datt Capital released a media statement on Thursday saying it was a shareholder in Perpetual, and warned that the Perpetual-Pendal deal would destroy shareholder value.

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