Soul Pattinson in $3 billion bid for Perpetual as split on the cards

Morgan Stanley analyst Andrei Stadnik said Perpetual’s review could contribute to a roughly 25 per cent upside for the stock. “The corporate trust division in particular has attracted interest from private equity in the past,” he said. “We think the asset manager may be undervalued by the market.”

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However, Stadnik said there could be tax implications to consider and varying views on how to reallocate the corporate overhead costs. “A demerger could be simpler from a gains-on-sale-tax perspective,” he said.

WHSP said its indicative offer provided an opportunity for Perpetual shareholders to “unlock value in a tax efficient structure” while retaining exposure to each of Perpetual’s three businesses.

JP Morgan analyst Siddarth Parameswaran said Perpetual may look at spinning off the corporate trust and wealth management business with a possible partial sale for the right price.

“Both the corporate trust and wealth management divisions are quality businesses with good growth records and scale and command a higher multiple than the asset management business,” he said, adding the sale of corporate trust and wealth management businesses could help crystallise value for shareholders. “What will be important to look out on is how much the separation costs could be and if there will be any dis-synergies.”

Several companies have made a bid for the fund manager over the years including private equity and hedge fund Regal which lobbed two offers at the company last year.

Morningstar analyst Shaun Ler said while Perpetual’s corporate trust business could be relatively cleanly separated from the other divisions, there was some entanglement between the asset management and wealth management businesses which could make a split more complex.

However, Ler said the company had been under pressure to generate value for some time and that asset managers were increasingly consolidating amid a challenging environment.

“Asset managers around the world have been under pressure, and as a result, a lot of them have seen their stock prices trading at quite depressed levels,” he said. “The common trend right now is consolidation.”

Ler said the market was failing to realise the value of the business and that the firm was exploring an avenue to expedite value creation for its shareholders, but that the benefit of the change would lie in the price paid for any businesses it sold off.

“They’re sitting on some really good quality assets that they could potentially sell for higher funds than what the market is factoring in through the current stock price,” he said. “If they can sell their assets at a higher price than what the market is factoring in, it will be a positive for shareholders.”

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