The Pendal takeover will create a $200b asset manager, so why is the Perpetual share price tanking?

Perpetual shares finished down amid a proposed acquisition.

| More on:
A young investor working on his ASX shares portfolio on his laptop

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Key points

  • Perpetual has put forward a proposal to acquire Pendal Group in a scrip/cash consideration 
  • Investors weren't impressed by the news or the company's FY22 results, also posted today 
  • The Perpetual share price has slipped more than 31% over the past 12 months 

The Perpetual Limited (ASX: PPT) share price finished the day more than 8% in the red on Thursday, closing the session at $27.75.

The drop marks a 52-week low for the company, despite announcing its FY22 results before the open today as well.

Noteworthy is that Perpetual also announced its planned takeover of Pendal Group Ltd (ASX: PDL), a move that would create an asset management giant with more than $200 billion in assets under management (AUM).

Perpetual pursues Pendal

In addition to its FY22 earnings, the company advised its intention to acquire Pendal in a part-scrip/part-cash consideration.

Under the proposal, Pendal shareholders would receive 1 Perpetual share plus $1.976 in cash for each share they held.

The mathematics of the deal values Pendal at approximately $6.02 per share on today's quotes.

This represents a 13% premium to Pendal's closing price today (note, Pendal gained 8% today as well) and a 23% premium to its closing price on Wednesday.

If successful, the newly formed entity would oversee more than $200 billion in AUM.

The deal is also accretive to earnings per share (EPS) for Perpetual and could deliver double-digit earnings growth once integrated.

Pendal CEO, Deborah Page said the transaction would bring together "two iconic financial services firms".

"We believe this is a compelling opportunity for shareholders and the business alike", she added.

The combination will deliver a significant increase in scale, boost our position in an increasingly competitive global market and bring strategic benefits in the dynamic sectors in which we operate, both domestically and internationally.

Meanwhile, Perpetual CEO, Rob Adams said the "defining acquisition" was both "strategically and financially compelling". He continued:

[The deal allows] us to realise our strategic ambitions significantly sooner than would otherwise occur individually, bringing forward years of growth potential.

Despite the perceived benefits, investors were less than impressed by the news and compressed the Perpetual share price deep into the red today.

This sent prices tumbling to 52-week closing lows by the end of the session. This brings losses to more than 31% for the past 12 months.

Returns for each security are seen on the chart below.

TradingView Chart

Motley Fool contributor Zach Bristow has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Mergers & Acquisitions

Projection of two hands being shaken on a deal.
Materials Shares

Sayona Mining shares sink 13% on Piedmont Lithium merger news and capital raise

This merger will create the largest lithium producer in North America.

Read more »

Miner looking at a tablet.
Materials Shares

Down 28% in 2024, why this ASX 200 lithium stock could now be 'deeply undervalued'

The ASX 200 lithium stock has drawn plenty of investor attention over the past month.

Read more »

Woman looking at her tablet at a warehouse.
Mergers & Acquisitions

ASX 200 stock slides on huge $13 billion buyout news

ASX 200 investors are mulling over the $13 billion merger implications on Wednesday.

Read more »

Rocket powering up and symbolising a rising share price.
Mergers & Acquisitions

Guess which ASX microcap stock just rocketed 67% on takeover news

Investors are sending the ASX microcap stock flying amid a takeover bid.

Read more »

A group of business people pump the air and cheer.
Mergers & Acquisitions

This ASX small-cap stock is exploding 75% on takeover news!

The takeover premium is large.

Read more »

Man with rocket wings which have flames coming out of them.
Mergers & Acquisitions

Guess which ASX stock just rocketed 40% on takeover news

A colossal company finds value in the small end of our ASX town.

Read more »

Data Centre Technology
Mergers & Acquisitions

ASX 200 stock nabs $400 million data centre amid AI rush

Another way to invest in the enablers of artificial intelligence is being built.

Read more »

two men in business suits sit across from each other at a table with a chess board on it. Both hold their hands to their chins and look down in serious contemplation of their next move.
Resources Shares

'Not ruled out': Could BHP still buy Anglo-American?

This mega-deal might not be as dead as it looks.

Read more »