IOOF eyes Equity Trustees

Don’t assume Equity Trustees Ltd now becomes a sitting duck for IOOF Holdings Ltd if Perpetual Ltd does succeed in its takeover of Trust Co.

If Perpetual does close the Trust Co deal, its 13.5 per cent stake is likely to revert to IOOF. Christopher Kelaher, IOOF’s managing director, has harboured takeover aspirations toward both Trust Co and Equity Trustees; the latter he views as fundamentally a better business than the former.

Kelaher seems happy to let Perpetual acquire Trust Co after forcing Perpetual to increase their initial offer by some 20 per cent.

Still, Equity Trustees’ board recognises the company is now in play. There may be a takeover offer from IOOF the board will be forced to accept. But Equity Trustees wants a hefty premium above its current share price, as of 1144 AEST, of $17.80.

The company privately says it is worth a lot more, as much as $26 a share, a whopping 46 premium over its current share price.

That valuation is based on a view the corporate trust business of Equity Trustees is growing. It now manages $30 billion as a responsible entity. Equity Trustees has a growing private wealth unit, it is getting increasing deal flow on estate planning, as well as a niche asset management business.

Like Perpetual’s offer for Trust Co., Equity Trustees shareholders could still block a deal with IOOF.

Some shareholders may want Equity Trustees to remain independent if Trust Co is subsumed into Perpetual. They may see it as advantageous to take blocking stakes if IOOF does make an offer for Equity Trustees.   

IOOF’s Kelaher and his advisers at Nomura will have to factor all of this if IOOF does launch a takeover for Equity Trustees.