The Australian diversified investor Washington H has submitted a proposal of A$3.1 billion ($2 billion). Soul Pattinson (WHSP) (SOL.AX) for the local fund manager Perpetual (PPT.AX). This is the most recent indication of consolidation in the nation’s wealth management industry.
WHSP is the largest stakeholder in Perpetual, with a 9.9% interest in the company. The proposal was submitted just a few hours after Perpetual announced that it was considering separating its central asset management division from its corporate trust and wealth management operations.
In response to a request for comment from Reuters about WHSP’s proposal, which was made after market hours, Perpetual did not respond. The strategic review announcement caused the company’s shares to increase by 6%.
The indicative non-binding scrip bid places the value of a share of Perpetual at A$27, representing a premium of 28.6% over the firm’s share price on November 13, when WHSP disclosed that it had raised its holding in the company.
According to a statement released by WHSP, the proposal asks for the asset management division of Perpetual to be separated from the rest of the company and handed to the shareholders from which it now benefits.
The wealth management and corporate trust businesses that Perpetual owns would remain in its possession, and WHSP would also take on about 700 million Australian dollars’ worth of Perpetual’s debt.
A total of A$1.06 billion worth of WHSP shares and A$2 billion worth of Perpetual Asset Management shares will be included in the A3.1 billion offer.
“WHSP believes the complexity of the Perpetual group, together with the current market backdrop and Perpetual’s high financial leverage, is weighing on the share price and constraining Perpetual’s strategic flexibility,” according to the organization.
Shaun Ler, an equities analyst at Morningstar, stated that the proposal from WHSP reflects a reasonable valuation for perpetual at a time when the macroeconomic backdrop is unfavorable for fund managers.
In addition, the transaction makes it possible for investors to withdraw their money without assuming the risk of execution associated with Perpetual’s plan to divide up assets, he noted.