I can't see how SOL won't come back and script bid for PPT post the dividend and divestment to KKR early next year after shareholder approval.

SOL already owns 12% of PPT and averages around $25.50 a share, this will be what SOL wants as stated below and i'd happily accept SOL script as management, they would rid PPT of the arrogance and incompetence providing shareholders great long term value.

I just sold LTM and brought more PPT to average up.

Updated

Perpetual rejects Soul Patts’ $3b bid

Jonathan Shapiro and Anthony Macdonald

Updated Dec 6, 2023 – 7.27pm,first published at 4.44pm

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Perpetual has rejected a $3 billion bid from Washington H. Soul Pattinson saying it “materially undervalues” the company’s various businesses.

The investment conglomerate made the offer to acquire Perpetual and break the funds management business up.

The rejection announcement came after Perpetual said its board was exploring a demerger of its asset management unit from its wealth and corporate trust business in an effort to unlock up to $1 billion of value.

Perpetual CEO Rob Adams is under pressure to deliver $80 million of cost savings. Brook Mitchell

Soul Patts is the largest shareholder of Perpetual, with a 9.9 per cent stake, and proposed to acquire the wealth and corporate trust units in a scrip deal while assuming the debt and stranded group costs.

The asset management unit would be left owned by existing Perpetual shareholders. Soul Patts said its offer implied a valuation for the wealth and trust business of $1.9 billion, adjusted for liabilities.

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Its bid, lobbed on November 21, was the equivalent of $27 per share, or $3 billion. This comprised of Soul Patts shares worth $1.06 billion and Perpetual Asset Management scrip worth an estimated $2 billion. It was a 28.6 per cent premium to the closing share price at the time.

The proposal comes after a tough year for Perpetual. The 137-year-old firm acquired rival fund management business Pendal in a $2 billion transaction that has struggled to win over investors and led the share price to linger below analysts estimates of its fair value.

On Wednesday, Perpetual said its board was mulling a “separation of its corporate trust and wealth management businesses and creating a more focused asset management business”.

A demerger may boost the value of Perpetual, analysts say, because the sum of its three main business units is worth more than the $3 billion enterprise value ascribed by the sharemarket.

Change of tune

Most brokers pinned the combined valuation of the corporate trust and wealth unit at around $1.7 billion to $2.2 billion, accounting for two-thirds of the market value. Meanwhile, the remaining asset management unit accounted for two-thirds of the group’s net profit.

“We think the asset manager may be undervalued by the market,” Morgan Stanley’s Andrei Stadnik told clients. He estimated it was valued by the market at between 5 and 6 times earnings, below his 8.3 times valuation.

JPMorgan’s Siddharth Parameswaran said the asset management unit could be worth 10 times earnings or $1.9 billion.

Bell Potter analyst Marcus Barnard said a break-up could create more than $1 billion of shareholder value. But he called out a change of tune from Perpetual management.

“This is a slightly surprising announcement given the company’s previous view that it was worth more [as] a combined group with three legs, rather than split three ways,” Mr Barnard said. “The three businesses were seen as having separate growth profiles, able to provide support to the group at different points in the business cycle.”

Perpetual shares jumped 6.3 per cent to $23.76. The shares are 7.8 per cent lower so far this year, while the broader market has traded sideways.

While the move to demerge was welcomed in the market, it does raise further doubts about the merits of Perpetual’s decision to acquire Pendal.

Critics of the deal who said the decision to expand its exposure to asset management would lead to the market ascribing a lower multiple to the group have been proved correct.

Perpetual’s acquisition of Pendal was almost derailed after ASX-listed fund manager Regal Partners and private equity firm BPEA EQT lobbed a counter bid for the company that proposed a break-up of the business.

That failed $33 per share bid resulted in a court ruling that determined Perpetual was effectively bound to proceed with the Pendal acquisition.

While a demerger may not go ahead, Perpetual chief executive Rob Adams is under pressure to deliver $80 million of cost savings from combing the two asset management firms. Sources said the announcement may have been prompted by shareholder pressure to address Perpetual’s poor sharemarket performance.