ACCC gives Perpetual green light

Wealth manager gets ACCC ok to take over The Trust Company

Mike King

Mike King is a Fool.com.au Investment Analyst and Writer. He caught the investing bug more than a decade ago, at a time when the U.S. had invaded Iraq and fear reigned in the markets. His initial success as the markets took off encouraged his passion and thirst for knowledge. With 13 years behind him at one of Australia's largest domestic banks, Mike's passion for stocks led him to join a boutique funds management firm, where he stayed for four years. A seven-year stint in equity research at one of the largest investment banks in the world followed that, giving Mike a thirst to pursue his passion further. Mike holds a Diploma in Applied Finance and Investment and a Graduate Certificate in Financial Planning. His passion is to help retail investors invest better, and that passion was one of his primary reasons for joining The Motley Fool Australia in late 2011. Mike has written thousands of articles since joining, including for Fairfax Media, Yahoo!7, Ninemsn and has also appeared on ABC's The Business. You can see all of Mikes' holdings here

Published September 19, 2013 11:53 am AEST

Wealth manager Perpetual (ASX: PPT) is one step closer to taking over The Trust Company (ASX: TRU), after the Australian Competition and Consumer Commission (ACCC) decided not to oppose the takeover.

Trust Co provides trustee and wealth management services, financial and estate planning to both retail and corporate customers. Perpetual is better known as a fund manager, with close to $25 billion in assets under management.

The company has also agreed to divest the 13.4% stake in rival bidder Equity Trustees (ASX: EGT), currently held by Trust Co, to appease the regulator.

"After a thorough investigation, and subject to the undertaking to divest the shareholding in Equity Trustees, the ACCC's view is that this acquisition is unlikely to lead to a substantial lessening of competition in any relevant market," ACCC chairman Rod Sims said.

The combined company will become the largest provider of trust services in Australia, after Perpetual entered an agreement with IOOF Holdings (ASX: IFL) whereby IOOF will buy Trust Co's stake in Equity Trustees.

That puts the spotlight firmly on Equity Trustees as the next takeover target, as the industry consolidates. Trust Co shareholders are expected to receive 0.182 Perpetual shares for each Trust share, along with a fully franked special dividend of 22 cents per share.

Trust could also pay shareholders an interim fully franked dividend of up to 17 cents a share on top of the offer from Perpetual. But Trust shareholders also have the ability to receive shares, cash or a combination of both, depending on which offer suits their individual circumstances.

With Australian superannuation sitting at around $1.6 trillion, there's plenty of demand for professional finance managers to manage all aspects of Australian consumers' finances, including those outside super. As the super pool has grown, it has become a lucrative business to be in, and we could see more mergers and acquisitions by the larger wealth managers.

Foolish takeaway

It's no wonder then that Perpetual, IOOF and Trust Co are all trading at premium P/E ratios of over 20, while Equity Trustees is trading at 17 times earnings. Foolish investors may want to add Perpetual and IOOF to their watchlist, and keep an eye on Equity Trustees.

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Motley Fool writer/analyst Mike King doesn't own shares in any companies mentioned.

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