Trust Co suitors step up wooing
IOOF chief executive Chris Kelaher told BusinessDay it behoved the Trust Co board to accept its "clearly superior" offer "sooner rather than later". It has 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.
Mr Kelaher said Trust Co offered an attractive path into fast-growing sectors such as self-managed superannuation and philanthropy.
But Equity Trustees, the party that put Trust Co in play in February, still hopes to seal the deal and said it was keeping open the option of a cash component of its bid.
Financial services giant Perpetual will hear the Australian Competition and Consumer Commission's verdict on its bid by September 19.
News of the three-way tussle put a rocket under Trust Co's share price, its shares soaring 12.8 per cent on Wednesday to close at $6.54.
Baillieu Holst analyst Nick Burgess said: "The ultimate successful bidder is difficult to determine."
Excluding synergies, Mr Burgess valued the Equity Trustee 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, he said, Equity Trustees offered Trust Co shareholders "the most long-term upside in theory".
"That said, the lack of a cash component and lower headline value on a pre-synergies basis are practical barriers for Equity Trustees," he told clients. "IOOF's position, with a higher bid than Perpetual, no ACCC concerns, as well as a proven, long-term track record of adding value through acquisitions looks strong."
Deutsche Bank analyst Kieren Chidgey estimated there was a 50 per cent chance that Perpetual would nab Trust Co, by offering a 10 per cent premium to IOOF's offer, or about $7.22 a share.
Equity Trustees chief executive Robin Burns told BusinessDay it was offering Trust Co shareholders a 60 per cent stake in the combined company, rather than the small stake in a large company offered by Perpetual and IOOF. Asked if Equity would consider a cash component to its bid, he said: "The option of looking at our bid remains open."
Frequently Asked Questions about this Article…
The Trust Co takeover has become a three-way tussle that’s been running about seven months. IOOF is the latest suitor to bid, Equity Trustees originally put Trust Co in play in February, and Perpetual is also competing — with an Australian Competition and Consumer Commission (ACCC) verdict on Perpetual’s bid expected by September 19.
IOOF offered Trust Co shareholders a choice: guaranteed cash of $6.03 per Trust Co share plus a 22¢ dividend, or 0.74 IOOF shares for each Trust Co share. The guaranteed cash component of IOOF’s offer is capped at $100 million.
Equity Trustees started the process and is offering Trust Co shareholders a large stake in the combined company (about 60%), and it says the option of adding a cash component to its bid remains open. Perpetual is waiting on an ACCC decision due September 19. Analyst valuations in the article put Equity Trustees’ pre-synergies value at $5.93 a share, Perpetual at $6.16, and IOOF at $6.34 cash or $6.64 in shares.
Analysts are divided. Baillieu Holst’s Nick Burgess said that, excluding synergies, IOOF’s offer is higher than Perpetual’s and Equity Trustees’ on a headline basis, but when synergies are included Equity Trustees could offer the most long-term upside. Burgess also noted practical barriers for Equity Trustees such as the lack of a cash component and lower headline value pre-synergies. Deutsche Bank’s Kieren Chidgey estimated there’s a 50% chance Perpetual could win if it offers about a 10% premium to IOOF (roughly $7.22 a share).
News of the three-way contest drove Trust Co’s share price higher: shares jumped 12.8% on Wednesday to close at $6.54, according to the article.
The article states IOOF’s guaranteed cash offer of $6.03 per share (plus a 22¢ dividend) is subject to a maximum cash payout of $100 million. That cap limits the total amount of cash IOOF will pay even if more shares are tendered.
Perpetual’s bid is subject to regulatory review: the Australian Competition and Consumer Commission will give its verdict on Perpetual’s offer by September 19. The ACCC decision could affect whether Perpetual can proceed with or complete its proposed takeover.
Based on the article, key factors include headline bid value (cash or scrip), whether a bidder offers a cash component, anticipated synergies from a combination, regulatory concerns (notably the ACCC for Perpetual), and each bidder’s track record. Equity Trustees highlights a large ongoing ownership stake for Trust Co shareholders, while IOOF emphasizes a higher bid, no ACCC concerns noted in the article, and a proven acquisition record.
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