Perpetual raises stakes in Trust bid
Trust Co's decision to support Perpetual's improved $227 million bid left rival suitors IOOF and Equity Trustees considering their options. But Deutsche Bank analyst Kieren Chidgey said there was only a 50 per cent chance Perpetual's latest offer would close the deal.
Just days after backing an offer by wealth management company IOOF, Trust Co on Monday said its board had "unanimously recommended that its shareholders vote in favour of the revised Perpetual proposal in the absence of a superior proposal, subject to an independent expert opining that the scheme is in the best interests of shareholders".
Trust Co directors would also vote their shares in favour of the offer, subject to those conditions, which include approval from the competition regulator.
The news pushed Trust Co shares to a five-year high of $7.10. The shares have risen 62 per cent so far this year, as three companies vie to take it over.
The previously low-profile company provides trustee and related services to corporate and individual clients, as well as investment and wealth management advice.
Equity Trustees, which began the bidding war with a scrip-only bid in February, has yet to respond to Trust Co's announcement. IOOF said on Monday it was looking at the Perpetual agreement.
The new Perpetual offer is 0.182 Perpetual shares for each Trust Co share. Alternatively, shareholders who choose to receive cash will receive 0.182 Perpetual shares for each Trust Co share, or a value of $6.29 per Trust shares, whichever is greater. The cash is capped at $110 million.
The Perpetual offer is subject to approval from the Australian Competition and Consumer Commission, which has previously noted that the purchase might "raise competition concerns in relation to certain corporate trust services" and that the two companies were both "strong providers of particular types of custody services".
Perpetual said it had "worked closely with the regulator and looks forward to the completion of [its] review" on September 19.
IOOF has promoted its bid as being more likely to be cleared by the ACCC than Perpetual's offer.
Baillieu Holst analyst Nick Burgess said he expected IOOF to "look at this revised offer and respond".
Mr Chidgey said Perpetual's revised offer - $7.18 a share including dividends - would have a positive impact on profit by the third year.
Frequently Asked Questions about this Article…
Perpetual tabled an improved $227 million proposal for Trust Co. The offer is 0.182 Perpetual shares for each Trust Co share, with an option that effectively guarantees at least $6.29 per Trust Co share for shareholders who choose cash (the cash component is capped at $110 million).
Trust Co's board unanimously recommended shareholders vote for the revised Perpetual proposal only in the absence of a superior proposal. The recommendation is subject to an independent expert concluding the scheme is in shareholders' best interests and to approval from the competition regulator. Directors also said they would vote their own shares in favour, subject to those conditions.
The Perpetual offer is subject to review and approval by the Australian Competition and Consumer Commission (ACCC). The ACCC has previously flagged that the purchase could "raise competition concerns in relation to certain corporate trust services," noting both companies are strong providers of particular custody services. Perpetual said it has been working closely with the regulator ahead of the ACCC's review completion date.
Analysts are split. Deutsche Bank analyst Kieren Chidgey put the chance of Perpetual's latest offer closing at about 50%, noting uncertainty as rival bidders weigh their options. IOOF and Equity Trustees remain possible competitors to the deal.
Trust Co's shares jumped to a five-year high of $7.10 after the news, and they have risen about 62% so far this year as three companies have vied to acquire the small-cap financial services business.
Shareholders can accept 0.182 Perpetual shares for each Trust Co share (the scrip option). Alternatively, there is a cash option structured so shareholders receive either 0.182 Perpetual shares or a cash value of $6.29 per Trust Co share — whichever is greater — although the total cash available under the scheme is capped at $110 million.
Rival bidders include IOOF and Equity Trustees. Equity Trustees kicked off the bidding war with a scrip-only bid in February but had not yet publicly responded to Trust Co's announcement. IOOF said it was reviewing the Perpetual agreement and has argued its own bid may be more likely to get ACCC clearance. Analysts expect IOOF to consider responding to Perpetual's revised offer.
Deutsche Bank's Kieren Chidgey said Perpetual's revised offer — which he assessed as equivalent to about $7.18 a Trust Co share including dividends — would likely have a positive impact on Perpetual's profit by the third year after the deal.
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