Perpetual pulls plug on $2.1b deal as KKR talks fail to offset tax concerns as break fee row looms

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Perpetual pulls plug on $2.1b deal as KKR talks fail to offset tax concerns as break fee row looms

Financial services conglomerate Perpetual has given up on its $2.1 billion deal unveiled last May to sell its corporate trustee and financial advice arms to US private equity giant KKR.

With the deal having been crippled by warnings in December of an unexpectedly big tax bill, the former *********** market darling has decided the ***** is no longer in the best interest of its long-suffering shareholders.

The official killing of the deal comes after reports of Perpetual negotiating with KKR in the hope of partially offsetting the effects of tax advice cutting the anticipated proceeds to shareholders by around one-third.

“Despite constructive engagement, no alternative transaction has been agreed,” Perpetual said in an ASX statement on Monday.

While putting a positive spin on the failed talks, Perpetual also warned a row could be looming about whether it could face a big bill from KKR for aborting the deal.

“KKR has asserted that a break fee is payable and has reserved its rights to seek further damages.,” Perpetual said. “Perpetual rejects KKR’s contentions.”

The termination of the KKR deal also cleared the way for the retirement of longstanding chairman Tony D’Aloisio, who vowed to step down in August as part of plans to cut the board size from nine to seven directors.

Perpetual has been under pressure from big shareholders and analysts to cuts costs and focus on fixing its asset management business, which has been battling to hang onto funds since buying Pendal from Westpac in 2023.

Perpetual posted a $472 million net loss for the 2023-24 financial year after taking a $710m pre-tax hit in its once outstanding asset management division.

After scrapping its deal with KKR, Perpetual flagged more potential hits — with more than $42m of after-tax transaction costs set to be booked when its releases its half-year result on Thursday. Its net profit was $34.5m in the December 2023 half and $26.8m the prior equivalent *******.

But with the KKR deal covering its trustee and advice divisions having crumbled, the board has decided to now seek a buyer for just the advice operation.

It said proceeds from the planned ***** would be used to invest in “organic growth” for its corporate trustee and asset management arms.

Perpetual managing director Bernard Reilly, who joined the group in September, said the ***** of the advice division was “the right course of action to deliver long-term value for our shareholders”.

“Today’s path forward retains earnings diversification in the near term while we work toward implementing a leaner, more simplified operating model,” Mr Reilly said.

Perpetual shares finished trading on Monday more than 2.3 per cent down at $23.20 — more than two-thirds lower than its peaks before the global financial crisis.

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