Perpetual now a $200bn business as Pendal deal closes

Perpetual Ltd (ASX: PPT) announced the completion of its planned acquisition of Pendal Group today. The news follows months of conjecture where Perpetual itself received a takeover bid from a consortium of Regal Funds Management and BPEA EQT and there was speculation that Perpetual would end the deal. The latter was resolved in a Supreme Court case binding Perpetual to its agreement with Pendal. The proposed acquisition had been approved by 99.28% of votes cast by Pendal shareholders.

Following the acquisition, Perpetual’s total assets under management will come to approximately $200bn.

Perpetual’s share price saw some early gains on the news before normalising across the day.

Pendal shareholders to receive cash and shares

Pendal shares have been suspended from trade since 12 January 2023 after the Supreme Court ruling to approve the acquisition by Perpetual. Shareholders as at 16 January 2023 of Pendal Group will receive $1.65 per share, less the Permitted Dividend Amount of 3.5 cents per share which was paid to Pendal shareholders on 15 December 2022, and one Perpetual share for every seven Pendal shares.

Perpetual is expected to spend A$619million in fulfilling cash requirements of the scheme and has issued a total of 54,747,428 Perpetual shares to Pendal Group shareholders. The cash component will be funded by a new debt facility.

It also estimates it will need to spend one-off tax costs of A$110 million to achieve synergies between the business.

Perpetual’s management anticipates the acquisition to be complementary to its existing business and expand scale and distribution. The firm’s Perpetual Chairman Tony D’ALoisio said:, “Through this transaction, we have created a leading global multi-boutique asset manager with significant scale, diversified investment strategies, world-class ESG capabilities and a stronger global distribution capability, complemented by Perpetual’s high-quality wealth management and trustee businesses.”

Broker analysis

Morgan Stanley has an overweight position on Perpetual on the basis of a solid update with guidance ahead of expectations.

Citi has maintained its Buy call on Perpetual. It states that “Perpetual remains reasonably inexpensive with an attractive dividend yield and cost synergies to come from its Pendal acquisition”. It notes that guidance for the combined business is scheduled for April however so it may take time for value to crystallise.

Perpetual share price v ASX200 over the last year

Perpetual shares opened trade today at $26.49, reaching a high of $26.79 within an hour of trade. It was trading at $26.60 at 1.55pm today.