Ball back in Perpetual's court as Trust Co backs IOOF offer

Small-cap financial services company Trust Co has thrown its weight behind a takeover offer from big wealth management company IOOF, leaving rival suitor Perpetual until Monday to sweeten its bid.

Small-cap financial services company Trust Co has thrown its weight behind a takeover offer from big wealth management company IOOF, leaving rival suitor Perpetual until Monday to sweeten its bid.

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.

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