US-based global buyout firm KKR is to acquire the wealth management and corporate trust businesses of Perpetual Group (ASX: PPT) for $2.175 billion.
Conclusion of the deal was announced by Perpetual on 8 May.
The acquisition, via a scheme of arrangement, will need agreement by shareholders but acceptance has been recommended unanimously by the Perpetual board, subject to there being no superior proposal, plus other usual conditions.
KKR partner and co-head of Australia David Lang said: “We have developed important relationships with the wealth management and corporate trust management teams and will invest behind their strategic ambitions of being two independent standalone businesses. We look forward to supporting the continued success of the wealth management business and the corporate trust business to deliver long-term benefits for their respective clients.”
The businesses will continue under their existing management teams.
After Perpetual’s debt has been paid down and transaction costs met, remaining proceeds of the carve-out are to be returned to shareholders. Details are to be announced in Perpetual’s financial year results in August.
It is anticipated that the deal will be completed in February. Perpetual Group chief executive Rob Adams is to retire following completion of the deal and a transition period.
Perpetual said the transaction will result in it becoming a standalone global multi-boutique asset management business with scale, diversified investment strategies and supported by a leaner and more streamlined structure, with a strong balance sheet. The business will have $227 billion in assets under management.
Perpetual has built up its asset management business through the acquisitions of Pendal last year plus Trillium and Barrow Hanley.
The company said the deal had been agreed at an attractive valuation of 13.7x the last twelve months’ earnings before interest, tax, depreciation and amortisation (EBITDA).
Chairman Tony D’Aloisio said that following a corporate review process the board had concluded that becoming a standalone asset management business, rather than remaining a complex diversified financial services conglomerate, which is difficult for the market to value, would provide better long-term value for shareholders who would also benefit from cash proceeds of the carve out of the corporate trust and wealth management businesses.
Following the deal being announced, Perpetual’s shares fell more than 8% from $24 to $21.97.
Image: Perpetual’s asset management business advises on sustainability strategies.