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Perpetual (ASX: PPT) has today rejected an unsolicited $1.7 billion takeover offer from a consortium comprised of Regal Partners (ASX: RPL) and a subsidiary of private equity firm BPEA EQT on the basis it undervalues the target.
The offer, lobbed just five months after Regal Funds and VGI merged to create Regal Partners, was a non-binding indicative all-cash proposal to acquire 100 per cent of the shares in Perpetual at a price of $30 per share.
Regal Partners claimed the proposal was ‘superior’ to another deal Perpetual has been laser focused on - that being Perpetual’s $2.5 billion takeover of investment management firm Pendal.
Not so according to Perpetual, which claimed the indicative proposal of $30 cash per share ‘materially undervalues’ the company.
“This offer is uncertain and conditional and the Perpetual Board believes that it is not in the best interests of its shareholders to engage on this offer and has therefore rejected the offer,” Perpetual said.
“Perpetual is committed to progressing its acquisition of Pendal Group, which was announced to shareholders on 25 August 2022.
“Perpetual’s board advises shareholders to take no action at this time. Perpetual will keep shareholders informed in accordance with its continuous disclosure obligations.”
The consortium’s goal was to acquire Perpetual to ‘accelerate the growth and scaling of its investment and distribution platform globally and to further diversify its existing product’.
Specifically, Regal envisioned it would take over the asset management business of Perpetual, while BPEA Private Equity Fund VIII’s indirect wholly-owned subsidiary Morello (‘BPEA EQT Fund’) would acquire the Perpetual Corporate Trust and private clients businesses.
“The combination of Regal and Perpetual’s asset management businesses would create a leading provider of active investment strategies globally, with over $90 billion in AUM across traditional and alternative asset classes, servicing a deep pool of client relationships across institutional, HNW and retail channels,” Regal said.
“The proposal is consistent with Regal’s growth ambitions, including the pursuit of inorganic growth where it makes sense.
“Following completion of the merger between Regal and ASX-listed VGI Partners and the subsequent successful capital raising, Regal’s balance sheet is strong. As a result, we expect multiple funding sources and funding markets to be available to Regal should the proposal progress further.”
After acknowledging that Perpetual has rejected the offer, Regal said it would ‘seek to understand the Perpetual board’s rationale and constructively engage with their concerns’.
Regal CEO and managing director Brendan O’Connor added that the rejected proposal provided ‘a compelling opportunity’ for shareholders.
“Inorganic growth opportunities represent one pillar of our ongoing growth strategy as we seek to further diversity our revenue, product and client base and leverage our existing operating platform,” O’Connor said.
“We believe the proposal we have submitted is compelling for Perpetual shareholders, and importantly, is more attractive than maintaining the status quo and proceeding with the proposed acquisition of Pendal.”
The offer and subsequent rejection has sent the shares of both Perpetual and Regal higher, with RPL climbing by 4.85 per cent in early trade, and PPT up by 6.19 per cent at 11.40am AEDT.
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