Perpetual Ltd (ASX: PPT) shares have taken a hit on Monday after the company confirmed that its much-anticipated deal with global investment giant KKR has been terminated.
The announcement ended months of speculation about the future of Perpetual's Corporate Trust and Wealth Management units.
With no agreement reached, the company has a new plan in place, including the sale of its wealth management arm. Let's take a closer look.
Perpetual shares are trading lower today as investors digest the news that its deal with KKR will no longer go ahead.
Perpetual had been in talks with KKR since May last year, with a $2.2 billion deal on the table after plenty of back and forth between the two financial giants.
But the Australian Taxation Office (ATO) threw a spanner in the works in December, questioning the tax liability that would be incurred.
Both Perpetual and KKR then "engaged extensively", including a revised offer from KKR to try to get the deal through.
But even after these negotiations, no alternative deal could be reached, and the scheme has been terminated after an independent expert found it "is not in the best interests of shareholders".
Despite constructive engagement, no alternative transaction has been agreed. After thorough review and the extensive period of engagement, the Board has determined that the value and terms of those revised proposals, including the various conditions included, were not in the best interests of shareholders and discussions have now ended.
In taking these steps, the Board believes that long-term shareholder value is best achieved by retaining ownership of its high-quality businesses that have strong market positions and provide organic growth opportunities, while also leveraging the work undertaken through the Strategic Review conducted in 2024 that considered all aspects of portfolio optimisation.
Investors have reacted swiftly this morning, with Perpetual shares trading lower from the open.
There's some contention on a "break fee" included in the contracts, which says Perpetual must pay KKR a fee associated with terminating the deal.
KKR asserts the break fee is payable, whereas Perpetual is rejecting these claims.
Perpetual has already incurred around $43 million in transaction and separation costs over the past 12 months.
This includes $24 million of associated costs in the last six months alone. There's no saying whether this will impact Perpetual shares.
Now that the KKR deal is off the table, Perpetual is proceeding with its plan to break up its businesses.
This is part of its "Strategic Review", which was carried out last year and looked at "all aspects of portfolio optimisation."
A major part of this strategy involves selling its Wealth Management unit. The division has long been a player in the Aussie market for high-net-worth advisory services and philanthropy.
Management says that proceeds from the sale would "strengthen the Group's position, as well as support investment in organic growth in both Corporate Trust and Asset Management".
No saying on what this means for Perpetual shares either at this stage.
Current CEO Bernard Reilly believes this is the "right course of action" for shareholders.
After extensive review of the options available to Perpetual shareholders, we believe this is the right course of action to deliver long-term value for our shareholders. My conviction in the quality, performance and growth opportunities across all of our businesses has only increased since I joined Perpetual in September last year.
Today's path forward retains earnings diversification in the near term while we work toward implementing a leaner, more simplified operating model with three very focused businesses that can deliver better returns and with a stronger balance sheet to support investment in growth over time.
Meanwhile, as part of this ongoing restructuring, Perpetual also confirmed a change in leadership.
Gregory Cooper will become Chairman after the company's H1 FY25 results are released, replacing current chair Tony D'Aloisio.
This transition was originally planned as part of the KKR deal but will proceed anyway.
With the KKR takeover scrapped, investors now have plenty to think about with Perpetual shares.
What happens from here, only time will tell. It's all on management now.
In the last year, the stock is down nearly 10%.
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