Australia's Perpetual ends talks with KKR on $1.4 billion sale of wealth, trust units (updated)

Perpetual

24/02/2025 04:26

* 
      Independent expert said deal not in best interest of
shareholders
    

        * 
      Negative tax ruling had affected returns to shareholders
    

        * 
      Perpetual CEO expects other parties to be interested in
wealth
business
    

  
 (Updates share price in second paragraph and adds CEO comment
from fifth paragraph)
    By Scott Murdoch
       SYDNEY, Feb 24 (Reuters) - Australia's Perpetual Ltd
 PPT.AX  has terminated talks with KKR  KKR.N  for the A$2.2
billion ($1.4 billion) sale of its wealth management and
corporate trust units and said it would pursue a sale of its
wealth management business separately.
    Shares of Perpetual fell nearly 4% on Monday,
underperforming the broader S&P/ASX200  .AXJO  index, which was
flat.
    The deal with private equity group KKR, which was announced
last May, was deemed by an independent expert's report to be not
in the best interests of shareholders, Perpetual said on Monday,
in line with initial expert advice it had flagged in December
after a negative tax ruling.
    Perpetual said the break fee for the deal not going ahead,
identified as A$21 million in regulatory filings, was in
dispute, and it was not going to pay that sum. 
    It flagged KKR had said it would reserve its right to seek
further damages. KKR declined to comment on the deal talks
ending and the break fee payment.
    Work on the sale of the wealth business will begin now that
the talks with KKR have ended, Perpetual CEO Bernard Reilly told
Reuters.
    "It's a process where we believe there will be a number of
interested parties... the business has continued to perform well
since the original deal was announced in May last year, that is
a positive," Reilly said in an interview. 
     Wealth management has become a hot spot for dealmaking in
Australia, with superannuation and wealth manager Insignia
 IFL.AX  at the centre of a $1.9 billion takeover tussle
involving CC Capital Partners, Bain Capital and Brookfield.
        "If you look at the deal activity in the last six months
there is a lot interest in the sector, and that is reflected in
some of the expansion in multiples being paid for those
businesses," Reilly said. "That is a positive for us selling
that business."
    The deal with KKR for the businesses had been put on hold
for the last two months after Perpetual received a ruling from
the Australian Taxation Office that would lead to a much
higher-than-expected tax bill if the transaction proceeded. 
    Perpetual estimated that its tax bill would reduce cash
proceeds from the deal to between A$5.74 and A$6.42 a share from
the previously expected range of A$8.38 to A$9.82 a share.
    Perpetual said last week that KKR had lodged a revised
proposal without identifying the value of the bid.
    Local media reported KKR had revised the value of its offer
to A$8 per share.
    ($1 = 1.5699 Australian dollars)

 (Reporting by Scott Murdoch in Sydney; Additional reporting
Roshan Thomas in Bengaluru; Editing by Sonali Paul and Jamie
Freed)
 ((Roshan.Thomas@thomsonreuters.com;))