Australia's Perpetual sinks on adverse tax ruling over KKR deal

Perpetual

10/12/2024 24:42

By Himanshi Akhand
       Dec 10 (Reuters) - Shares of Perpetual  PPT.AX  fell
nearly 10% on Tuesday after Australian tax authorities' review
of its deal to sell wealth management and corporate trust
businesses to KKR & Co  KKR.N  revealed higher liabilities and
lower shareholder returns.
    The fund manager said that the Australian Taxation Office
(ATO) refused to issue a binding ruling confirming that Part IVA
of tax rules, which could be used to invalidate the tax benefit
of a scheme, would not apply to the KKR deal.
    Perpetual now estimates taxes and duties relating to the
deal to be between A$493 million ($317.20 million) and A$529
million, compared with its initial assessment of between A$106
million and A$227 million.
    This also means that estimated cash proceeds from the deal
would reduce to A$5.74 to A$6.42 apiece, from the previously
expected range of A$8.38 to A$9.82.
    Shares of the fund manager fell as much as 9.7% to A$19.785
after the taxation update, marking their biggest intraday drop
since late-July 2023 and becoming the top loser in the benchmark
ASX 200 index  .AXJO .
    Perpetual said it was "extremely disappointed" and that it
disagrees with the tax office's views.
    "Perpetual considers it has strong grounds to dispute this
position ... Perpetual and KKR are engaging to consider the
potential impact on the transaction," the company said in a
statement. 
    Analysts at Citi said ATO's assessment would see significant
tax leakage from the deal.
    "It seems hard to see the independent expert now being able
to recommend the deal as being in the best interest of
shareholders while a shareholder vote would also be unlikely to
proceed," Citi analysts said.
    With the deal unlikely to proceed in the originally proposed
form, Perpetual's options would now include those for the
business to stay together with the hope for someone to buy the
whole business including the asset management segment, Citi
said.

    ($1 = 1.5542 Australian dollars)

 (Reporting by Himanshi Akhand in Bengaluru; Editing by Sherry
Jacob-Phillips)
 ((Himanshi.Akhand@thomsonreuters.com;))