Pendal acquisition a catalyst and a bridge too far

ANALYSIS

For Perpetual’s retiring chief executive, Rob Adams the acquisition of competitor Pendal two years’ ago proved to be a bridge too far.

Private equity player KKR and others had been hovering around Perpetual for some time, but the Pendal transaction and market sentiment represented the main catalyst for the events which played out yesterday.

The result is that the iconic Perpetual brand will continue but it will be an almost entirely funds management play.

The wealth management and corporate trust businesses will now reside under the control of KKR as does Colonial First State and it will be lost on no one that there exist substantial synergies in the CFS business and the old Perpetual Private and the Corporate Trust business.

The writing was on the wall for Perpetual’s chief executive, Rob Adams nearly six months ago when, under pressure from major shareholders, the board initiated a Strategic Review process which “examined a broad range of options available to unlock additional value for shareholders”.

It said that those options included but were not limited to divestment of Wealth Management and the Corporate Trust businesses “and maintaining the status as a diversified financials conglomerate”.

When the board used an update to the ASX to inform the market that it had entered into an exclusivity arrangement with KKR which would expire on the same date as yesterday’s release of the Strategic Review, few doubted that Perpetual’s days as a “conglomerate” were significantly numbered.

The board’s announcement of the Strategic Review outcome stated simply: “the Board has determined that becoming a pure-play global Asset Management business through a demerger, combined with the separation of the Wealth Management and Corporate Trust businesses will provide superior value for shareholders.

The transaction was always going to mark the exit point for Perpetual chief executive, Rob Adams but he nonetheless described the Board decision as a positive outcome for shareholders, clients and the company’s people.

“Each business will now have the focus and capital required to continue to grow in their respective markets ensuring our clients continue to receive world-class advice and services”.

“In the remaining Asset Management business, our shareholders will own a simpler, more streamlined, pure play and independent global multii-boutique investment management business with organic growth potential,” Adams said.

But, of course, Adams who championed Perpetual’s acquisition of Pendal will not be there to lead the new, funds focused Perpetual forward.