In This Article:
By Scott Murdoch
SYDNEY (Reuters) -Australia's Perpetual Ltd has terminated talks with KKR for the A$2.2 billion ($1.4 billion) sale of its wealth management and corporate trust units and said it would pursue a sale of its wealth management business separately.
Shares of Perpetual fell nearly 4% on Monday, underperforming the broader S&P/ASX200 index, which was flat.
The deal with private equity group KKR, which was announced last May, was deemed by an independent expert's report to be not in the best interests of shareholders, Perpetual said on Monday, in line with initial expert advice it had flagged in December after a negative tax ruling.
Perpetual said the break fee for the deal not going ahead, identified as A$21 million in regulatory filings, was in dispute, and it was not going to pay that sum.
It flagged KKR had said it would reserve its right to seek further damages. KKR declined to comment on the deal talks ending and the break fee payment.
Work on the sale of the wealth business will begin now that the talks with KKR have ended, Perpetual CEO Bernard Reilly told Reuters.
"It's a process where we believe there will be a number of interested parties... the business has continued to perform well since the original deal was announced in May last year, that is a positive," Reilly said in an interview.
Wealth management has become a hot spot for dealmaking in Australia, with superannuation and wealth manager Insignia at the centre of a $1.9 billion takeover tussle involving CC Capital Partners, Bain Capital and Brookfield.
"If you look at the deal activity in the last six months there is a lot interest in the sector, and that is reflected in some of the expansion in multiples being paid for those businesses," Reilly said. "That is a positive for us selling that business."
The deal with KKR for the businesses had been put on hold for the last two months after Perpetual received a ruling from the Australian Taxation Office that would lead to a much higher-than-expected tax bill if the transaction proceeded.
Perpetual estimated that its tax bill would reduce cash proceeds from the deal to between A$5.74 and A$6.42 a share from the previously expected range of A$8.38 to A$9.82 a share.
Perpetual said last week that KKR had lodged a revised proposal without identifying the value of the bid.
Local media reported KKR had revised the value of its offer to A$8 per share.
($1 = 1.5699 Australian dollars)
(Reporting by Scott Murdoch in Sydney; Additional reporting Roshan Thomas in Bengaluru; Editing by Sonali Paul and Jamie Freed)