The Pendal Group Ltd (ASX: PDL) share price is falling on Tuesday.
In morning trade, the fund manager's shares are down 2.5% to $5.16.
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Why is the Pendal share price falling?
The Pendal share price is under pressure this morning after the company rejected a takeover proposal from rival Perpetual Limited (ASX: PPT).
And while the fund manager has tried to soften the blow by announcing a share buyback, it hasn't been enough for some investors to stick around.
According to the release, Pendal believes the indicative proposal of 1 Perpetual share for every 7.5 Pendal shares plus $1.67 cash per share "significantly undervalues the current and future value of Pendal."
In light of this, the Pendal Board unanimously determined that the proposal is not in the best interests of shareholders.
It highlights that Pendal has some of the most respected investment talent in the world, with a track record of delivering superior long term performance. It also notes that it has a compelling global distribution footprint across the UK, Europe, the US and Australia, which it feels is not adequately recognised in the indicative proposal.
Furthermore, the Pendal Board points out that the proposal represents only a 0.3% premium to the 180-day volume weighted average price of the Pendal share price up to 1 April 2022 and is materially below Pendal's underlying standalone value.
Share buyback
Lending some support to the Pendal share price today is news that the company intends to undertake a share buyback.
According to a separate release, the company plans to commence an on-market share buy-back of up to $100 million following the release of its interim results on 10 May 2022.
Pendal is making the move due to being a strong cash generating business with a solid balance sheet, which it notes provides significant flexibility to pursue both growth and capital management initiatives for the benefit of shareholders.
The Board determined that an on-market buy-back is the most efficient way to deliver an earnings per share accretive return of capital, while still maintaining flexibility to fund future growth initiatives and Pendal's dividend policy.
Funds under management (FUM) update
Finally, Pendal also released an update which revealed that its FUM stood at $124.9 billion at the end of the March quarter.
While this was down from $135.7 billion since the end of December, management was pleased given the volatile markets.
Pendal's CEO, Nick Good, said: "This quarter we are pleased to have seen a significant improvement in flows despite weak and volatile markets that have impacted overall fund levels."
