Ball back in Perpetual's court as Trust Co backs IOOF offer
Trust Co said on Wednesday that its board had "determined that the IOOF proposal was likely to be a superior proposal ... and has accordingly provided Perpetual with the opportunity to match or better [it]".
IOOF responded that it agreed to the Trust board's request to make drafting changes to the scheme implementation agreement, and the deadline for acceptance of the revised proposal would be September 9.
The three-way battle for the previously low-profile Trust Co, which provides trustee and related services to corporate and individual clients, as well as investment and wealth management advice, has pushed its shares 55 per cent higher this year.
The bids started when Equity Trustees lobbed a scrip-only offer in February.
Equity Trustees is continuing due diligence on Trust Co. It has promoted its deal as offering shareholders synergies and 60 per cent of an enlarged company, rather than a tiny take in an enormous one.
Perpetual's offer followed, but the corporate watchdog noted the deal might "raise competition concerns in relation to certain corporate trust services". The Australian Competition and Consumer Commission's final decision on Perpetual's offer is due on September 19.
Meanwhile, the acquisitive IOOF this week offered guaranteed cash of $6.03 for each Trust Co share, plus a 22¢ dividend, or 0.74 IOOF shares for each Trust Co share. The guaranteed cash consideration is capped at $100 million.
The ACCC said on Wednesday it "was aware of the proposed acquisition" and details would be posted on its website if it decided a public review was required.
Excluding synergies, Baillieu Holst analyst Nick Burgess has valued the Equity Trustees bid at $5.93 a share, Perpetual's at $6.16 and IOOF's at $6.34 cash or $6.64 in shares.
But taking synergies into account, Mr Burgess said this week that Equity Trustees offered Trust Co shareholders "the most long-term upside in theory".
"That said, the lack of a cash component and the lower headline value on a pre-synergies basis are practical barriers for Equity Trustees," he told clients.
Frequently Asked Questions about this Article…
Trust Co, a small-cap provider of trustee, investment and wealth management services, has attracted competing takeover offers. Equity Trustees launched a scrip-only bid in February, Perpetual followed with an offer that attracted regulatory scrutiny, and IOOF has put forward a cash-or-scrip proposal. Trust Co’s board recently determined the IOOF proposal was likely superior and has given Perpetual the opportunity to match or better it.
IOOF has offered guaranteed cash of $6.03 per Trust Co share plus a 22¢ dividend, or alternatively 0.74 IOOF shares for each Trust Co share. The guaranteed cash component is capped at $100 million. IOOF also agreed to make drafting changes requested by the Trust Co board, and the deadline for acceptance of the revised proposal was set for September 9.
Equity Trustees’ approach is a scrip-only offer, meaning Trust Co shareholders would receive shares in an enlarged Equity Trustees rather than cash. Equity Trustees has promoted the deal as delivering synergies and giving Trust Co shareholders around 60% of the enlarged company. It is continuing due diligence on Trust Co.
Perpetual made a competing offer after Equity Trustees. The corporate watchdog (ACCC) noted Perpetual’s deal might "raise competition concerns in relation to certain corporate trust services." The ACCC’s final decision on Perpetual’s offer was due on September 19, and the ACCC said it was monitoring the proposed acquisition and would post details if a public review was required.
Baillieu Holst analyst Nick Burgess valued the bids (excluding synergies) at: Equity Trustees $5.93 a share; Perpetual $6.16 a share; IOOF $6.34 a share in cash or $6.64 a share in IOOF scrip. He noted that synergies could change the relative attractiveness, especially for the Equity Trustees offer.
According to Baillieu Holst’s Nick Burgess, when synergies are taken into account Equity Trustees could offer the most long-term upside in theory because shareholders might benefit from combined operations. However, practical barriers include the lack of a cash component and a lower headline pre-synergies value, which can deter some shareholders.
Shareholders should watch the form of consideration (cash versus scrip), any caps on cash consideration (IOOF’s guaranteed cash is capped at $100 million), regulatory reviews (the ACCC is monitoring and has raised competition concerns about Perpetual’s bid), and key deadlines such as IOOF’s revised-proposal acceptance deadline of September 9 and the ACCC decision timing for Perpetual on September 19.
The takeover battle has significantly lifted Trust Co’s shares — the company’s stock has risen about 55% this year as competing bids and takeover speculation have unfolded.
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