ACCC ruling could revive battle for Trust Co

Equity Trustees has more room to move in the tussle to win control of The Trust Company.

In the three-way race to take out financial services firm The Trust Company, initial bidder Equity Trustees seems to have been largely forgotten.

But sources say the race outlier could raise its scrip-only bid by 10 to 15 per cent if the consumer watchdog paves the way for a sweetened tilt with its ruling on rival Perpetual’s bid this Thursday. Equity is also open to introducing a cash component, despite its major shareholders chasing the greater exposure to Trust Co that scrip-only affords.

Trust Co’s board has unanimously recommended investment services giant Perpetual’s sweetened $245 million bid – which is the highest to date – over competing offers from Equity Trustees and IOOF.

The Australian Competition Consumer Commission (ACCC) could rule against Perpetual given a takeover would see it control about 85 per cent of the corporate trust market in Australia. Separately, the watchdog could also take issue with Trust Co’s shareholding of about 13 per cent in Equity Trustees.

Since Trust Co endorsed Perpetual last week, it has shelved reciprocal due diligence with Equity Trustees. Trust Co’s board is understood to have been far from ecstatic that a company that had started off as an industry minnow had the gall to make a low-ball bid, analysts say.   

Equity Trustees has roughly tripled its market capitalisation in 10 years, while Trust Co’s has flatlined.

Equity Trustees in June increased its offer from 34 shares to 37 in exchange for 100 shares in Trust Co, after kicking off the bidding war with its initial offer in February.

Equity has not yet responded to Trust’s backing of Perpetual and is likely to wait until the ACCC moves.

Equity Managing Director Robin Burns confirmed to Data Room that “We would still very much like to win this competition".

The disappearance of Trust – which recorded EBITDA of $16.6 million in 2012-13 – will likely mark swift consolidation in a sector that boasts only a handful of attractive targets, chief among them WHK and Shadforth Financial Group in the listed space, and Centric in the unlisted space.