Perpetual concludes Strategic Review
Creation of a standalone, global multi-boutique Asset Management business and separation of Corporate Trust and Wealth Management
• Perpetual to become a standalone, global multi-boutique Asset Management business with scale, diversified investment strategies, and supported by a leaner and more streamlined structure, with a strong balance sheet.
• Wealth Management and Corporate Trust businesses to be separated to unlock value for shareholders.
• Perpetual has entered into a Scheme Implementation Deed with an affiliate of Kohlberg Kravis Roberts & Co. L.P. (together with its affiliates, “KKR”) who will acquire 100% of the two businesses via a Scheme of Arrangement (Scheme), for total cash consideration of A$2.175 billion.
This represents an attractive valuation of 13.7x Last Twelve Month (LTM) EBITDA and 16.3x Last Twelve Months (LTM) EBIT1 and will realise significant value for Perpetual’s shareholders.
• The Scheme is subject to a Perpetual shareholder vote (amongst other conditions) and if implemented, Perpetual shareholders are expected to receive cash proceeds.
Proceeds will be determined post repayment of outstanding Perpetual Group debt2 as well as separation and transaction costs and including customary business-specific net debt adjustments at completion, and shareholders will retain their current ownership in a more streamlined and debt-free global Asset Management business.
• Perpetual’s Board unanimously recommends shareholders vote in favour of the Scheme subject to there being no superior proposal and an Independent Expert concluding that the Scheme is in the best interests of Perpetual shareholders.
• Completion is anticipated to occur in February 2025, subject to satisfaction of customary conditions. • Group Managing Director and CEO, Rob Adams will retire following a period of orderly transition upon Completion.
• Non-executive Director, Gregory Cooper has been appointed as Deputy Chair to assist the Board with the Asset Management business and will chair a sub-committee to recruit a new CEO of Asset Management.
1 Last twelve months as at 31 December 2023. Based on management segment reporting EBIT of $133.5million, and management segment reporting EBITDA of $158.3 million (D&A is primarily on operating leases and software intangibles).
2 Gross debt was approximately A$771 million as at 30 April 2024.
Perpetual Limited (Perpetual, Perpetual Group or the Company) (ASX
PT) today announced the completion of an extensive Strategic Review3 , which has examined a broad range of options available to unlock additional value for shareholders including but not limited to a divestment of the Wealth Management and Corporate Trust businesses and maintaining the status as a diversified financials conglomerate.
Following a comprehensive process, the Board has determined that becoming a pure-play global Asset Management business through a demerger, combined with the separation of the Wealth Management and Corporate Trust businesses, will provide superior value for shareholders.
Upon completion of the transaction, shareholders will continue to own shares in Perpetual Limited which will be a leaner, debt-free, global, multi-boutique Asset Management firm managing A$227 4 billion in Assets Under Management, with quality investment teams, diversified investment capabilities and global distribution reach.
In addition, the Board has determined that the separation of the Wealth Management and Corporate Trust businesses represents compelling value to shareholders.
As a result, Perpetual has today entered into a binding Scheme Implementation Deed (SID) under which KKR will acquire these businesses. Under the agreement, KKR will acquire the businesses for A$2.175 billion by way of a Scheme of Arrangement (Scheme) and net proceeds will be returned to shareholders.
Proceeds will be determined after paydown of Perpetual Group debt, as well as separation and transaction costs and including customary business-specific net debt adjustments at completion5 .
The estimated cash proceeds to shareholders will be communicated to shareholders at Perpetual’s FY24 results in August 2024. The Perpetual Board agrees that a transaction with KKR represents compelling value for shareholders and is equally a strong outcome for employees, clients and other stakeholders.
KKR is a leading investment firm with a longstanding track record of investing and supporting the growth of businesses in Australia since 2006, with strong capabilities and experience in both complex carve-outs and the financial services industry.
KKR will make its investment from its private equity strategy.
Perpetual will provide transitional services to KKR for a period of 18 months post Completion with options to extend for a further 12 months. Following completion of the transaction, the Wealth Management and Corporate Trust businesses will continue to operate as standalone independent businesses, with continuity of management.
Perpetual Group Chairman, Tony D’Aloisio said, “Following a comprehensive review, which included shareholder feedback, the Board has concluded that becoming a standalone Asset Management business, rather than remaining a complex diversified financial services conglomerate which is difficult for the market to value, will provide better long-term value for Perpetual shareholders.
Shareholders will benefit from cash proceeds following the separation and acquisition by KKR of our Wealth Management and Corporate Trust businesses, while 3 Announced on 6 December 2023. 4 As at 31 March 2024.
5 Gross debt was approximately A$771 million as at 30 April 2024.
Perpetual Limited ABN 86 000 431 827 3 also retaining ownership in a more streamlined and debt-free global Asset Management business. “In assessing the options under the Review, the Board determined that a separation of Corporate Trust and Wealth Management via a Scheme of Arrangement was a superior path for our shareholders compared to other options available, delivering certainty, an attractive valuation and nearer-term returns to shareholders.
“KKR is highly reputable and has worked constructively with Perpetual management and our Board to come to an outcome that we believe is compelling for our shareholders.
“The Strategic Review was extremely thorough and considered a number of options, involving extensive engagement with several high-quality parties and potential bidders.
KKR offered both compelling value for shareholders as well as the highest degree of certainty in relation to the funding, execution and the ability to work with Perpetual to deliver a successful outcome.
These were important criteria as the Board considered and assessed options to maximise value for shareholders.” Perpetual Group CEO and Managing Director, Rob Adams said, “This is a positive outcome for our shareholders, our clients and our people.
Each business will now have the focus and capital required to continue to grow in their respective markets ensuring our clients continue to receive world-class advice and services.
In the remaining Asset Management business, our shareholders will own a simpler, more streamlined, pure-play and independent global multiboutique investment management business, with organic growth potential.
“The combination of Perpetual’s Australian Asset Management business and the acquisitions of Trillium, Barrow Hanley and Pendal, has created a high-quality global firm.
As a standalone business, it will be leaner, more agile and fully focused on enabling our highly respected investment professionals to continue to deliver strong returns to clients, whilst presenting longterm growth opportunities for our shareholders.”
Mr D’Aloisio added, “On behalf of the Board, I want to also thank our shareholders, employees, and clients for their support and patience during this important process.” Partner and Co-Head of KKR Australia, David Lang, said: “It is a privilege to be working with Perpetual on today’s transformational announcement and we thank the Board of Perpetual for their significant trust in KKR.
We have developed important relationships with the Wealth Management and the Corporate Trust management teams and will invest behind their strategic ambitions of being two independent standalone businesses.
We look forward to supporting the continued success of the Wealth Management business and the Corporate Trust business to deliver long-term benefits for their respective clients.”
Board Renewal and Leadership Changes The existing Board and Executive Team will continue in place to deliver the benefits from this transaction. To assist the Board, Non-executive Director, Gregory Cooper has been appointed as Deputy Chairman with a primary focus of assisting the Board on the Asset Management business.
Group CEO and Managing Director, Rob Adams will retire following a period of orderly transition upon Completion.
i have held PPT in the past
buying @ $23.98 in July 2011
reducing @ $26.81 in September 2012
reducing @ $34.62 in January 2013
and exiting in March 2023 @ $22.12
so here we are the market dislikes this currently down 6.2% but touched $22.20 this morning
so is there a play here ?
rival fund managers have been mostly leaking funds ( under management ) for the last three years
you might hope for a juicy special div. in about 18 months ( but 'return to shareholders ' can be rather ambiguous they might choose buy-backs
now i wonder if SOL ( i hold SOL ) is still interested either in the trimmed down PPT , the demerged arm or still willing to offer a higher bid for everything