After knocking back a similarly priced offer back in April, investment management firm Pendal (ASX: PDL) has today accepted a fresh takeover offer from rival Perpetual (ASX: PPT) that values the target at $2.5 billion.
Under the agreement which is unanimously recommended by the target’s board, Perpetual will acquire 100 per cent of Pendal, with shareholders to receive one PPT share for every 7.5 PDL shares held plus $1.976 cash for each Pendal share.
Pendal says this represents an increase of 30.6c per share from an initial proposal received from Perpetual in April as a result of an 18.3 per cent increase in the cash component of the scheme consideration.
As such, based on Perpetual’s undisturbed share price on 1 April 2022 ,the scheme implied an equity value for Pendal of $2.5 billion and an enterprise value of $2.3 billion.
Based on Perpetual’s closing share price on 24 August, the scheme implies an equity value for Pendal of $2.3 billion and an enterprise value of $2.1 billion, representing a premium of 23.3 per cent to PDL’s closing share price yesterday.
Pendal’s board has recommended shareholders accept the deal, noting it would combine two major Australian financial services firms to create “Australia’s pre-eminent global asset manager”.
“Pendal’s board is pleased with the improved proposal received from Perpetual, which is the result of extensive engagement between our companies. The scheme has the board’s unanimous support and is strongly supported by our investment teams,” Pendal chair Deborah Page says.
“The scheme consideration recognises the value Pendal has created as a home to some of the most respected investment talent in the world, with sustainable and impact investing capability and an impressive global distribution footprint.”
Post-merger, Pendal shareholders will own approximately 47 per cent of the combined group which will manage combined funds of $201 billion.
“Perpetual’s multi-boutique model is complementary to Pendal’s and our fund managers’ investment independence is assured,” Pendal CEO Nick Good says.
“We have always been confident in our ability to grow Pendal’s business across our key markets organically; however, the combination of the two businesses delivers a significant increase in scale, an enlarged and enhanced global distribution team, greater product capabilities, expertise and diversity, and global ESG leadership.
“All of this will enable us to achieve our strategic goals sooner while, at the same time, achieving an attractive valuation via the improved proposal for Pendal shareholders.”
The scheme must overcome some hurdles to come into effect, with shareholders to vote on the proposal, as well as regulatory approval from authorities in Australia, the United Kingdom, Ireland, Singapore and the US.
Pendal today told shareholders that the proposal was a “compelling opportunity”, noting the combination would deliver an increase in scale, boost the firm’s position in a competitive global market, and bring strategic benefits to the sectors in which it operates.
According to Perpetual, the acquisition is expected to realise $60 million of annual pre-tax synergies within the first two years, and deliver double-digit earnings per share accretion for PPT shareholders in the 12 months post completion.
“We are pleased that Pendal’s board of directors has unanimously recommended that Pendal shareholders vote in favour of the scheme, in the absence of any superior proposal and subject to the independent expert’s opinion that the scheme is in the best interests of shareholders,” says Perpetual chairman Tony D’Aloisio, who will be chairman of the combined group post-merger.
“Our board and management see this as a defining acquisition that brings together two of Australia’s oldest and most respected active asset management brands to create a diversified global asset management business of substantial scale. We believe the combination represents a strategically and financially compelling opportunity for both sets of shareholders, with our respective strategic ambitions realised significantly sooner than would otherwise occur.
“Rob Adams, chief executive officer and managing director of Perpetual, will lead the combined group and up to three directors of Pendal will be invited to join the Perpetual board.”
To satisfy the cash component of the offer, totalling $757 million, Perpetual says it will secure a new debt facility.
The acquisition is expected to close in late-2022 or early 2023, following approval from shareholders, regulators and the court.
Shares in PDL are up 13.7 per cent to $5.55 per share at 10.19am AEST.
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