Perpetual, the Australian asset manager, announced on Tuesday that an independent expert has concluded that the proposed sale of its wealth management and corporate trust business to KKR is not in the best interest of investors. This assessment follows a significant increase in the expected tax bill associated with the transaction.
The deal, initially valued at A$2.2 billion ($1.40 billion), now faces uncertainty. Earlier this month, Perpetual disclosed a much higher-than-anticipated tax liability, alongside increased liabilities and reduced shareholder returns. This development significantly impacts the estimated cash proceeds from the sale, lowering the range to A$5.74 to A$6.42 per share, compared to the previous projection of A$8.38 to A$9.82 per share.
KKR has not yet provided a comment on the situation. The sale of these businesses, including the historic Perpetual brand, would have fundamentally reshaped the company, leaving it as a standalone fund management business amidst a strategic turnaround.
Following the initial news of the tax issue, Morningstar analyst Shaun Ler commented, “These updates make the acquisition terms less favorable to shareholders than previously anticipated. In light of these developments, we think there is a low likelihood of the transaction proceeding in its current form.”
Perpetual confirmed that discussions with KKR are ongoing.
While the future of the deal remains unclear, the independent expert’s opinion and the revised financial projections cast a significant shadow over its successful completion. The substantial increase in the tax bill raises concerns about the overall financial viability of the transaction for Perpetual’s shareholders. Perpetual’s leadership now faces the challenge of navigating these complexities and determining the best course of action to maximize value for investors.
