Pendal rejects Perpetual's offer, announces buyback

Pendal’s board has determined that the take over “significantly undervalues” the current and future value of Pendal and is therefore not in the best interest of shareholders.

The conditional, non-binding indicative offer from Perpetual was for 1 Perpetual share for every 7.5 Pendal shares plus $1.67 cash, representing an indicative value of $6.23 per Pendal share.

In an ASX listing on Tuesday, Pendal said that the board came to the decision to reject the bid having considered a number of factors including Pendal’s “compelling global distribution footprint” across the UK, Europe, the US and Australia, the value of which “is not adequately recognised in the indicative proposal”.

Moreover, Pendal asserted that the indicative proposal represents only a 0.3 per cent premium to the 180-day VWAP of Pendal shares up to 1 April 2022 and is materially below Pendal’s underlying standalone value.

“Pendal’s board and management team will continue their focus on building a best-in-class global investment management platform with the objective of maximising long-term shareholder value.”

In a separate statement Pendal confirmed that it plans to launch a buyback of up to $100 million following the release of its financial results for the six months to March 31, on 10 May. 

"Pendal is a strong cash generating business with a solid balance sheet, which provides significant flexibility to pursue both growth and capital management initiatives for the benefit of shareholders," the ASX listing read. 

Pendal revealed that its board has been undertaking a capital management review since the start of the year, recognising that Pendal’s shares have been undervalued.

"The board has determined an onmarket buy-back is the most efficient way to deliver an earnings per share accretive return of capital while maintaining flexibility to fund future growth initiatives and Pendal’s dividend policy," it said. 

Perpetual targets pole position

In its own ASX listing last week, Perpetual boasted that its acquisition of Pendal would create a leading global asset manager with significant scale.

“Under the proposal, these two, highly complementary businesses would combine to create a leading global asset manager with significant scale, diversified investment strategies, strong ESG capabilities and a world-class global distribution network, complemented by high quality wealth management and trustee businesses,” Perpetual said.

“The combined group will be well placed to grow its asset management businesses across all key markets and channels, gain improved leverage and scalability across a unified business platform, delivering high quality client service, greater innovation, whilst meaningfully enhancing the growth profile of both companies,” it continued.

The proposal aligns with Perpetual’s strategy to grow its business globally and is said to be both strategically and financially compelling, with an initial estimate of approximately $50 million of run-rate pre-tax annual cost synergies expected, creating a clear leader in the Australian asset management market.