Trust Co suitors step up wooing

The battle for Trust Co is now reaching seven months and three suitors, with IOOF the latest to throw its hat in the ring for the small-cap financial services company.

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."