Perpetual: Difficult to Conclude if Acquisition by KKR Benefits Shareholders

The proposed acquisition of narrow-moat Perpetual’s wealth management and corporate trust businesses by KKR, unanimously recommended by its board, vindicates our view that their values are not reflected in the current Perpetual stock price. The face value of the offer is above our expectations and represents a step toward a capital return to shareholders. However, the lack of cost details on the transaction, the separation, and the capital gains tax make it difficult to ascertain whether or not the deal is accretive to our current intrinsic assessment. We retain our stand-alone fair value estimate of AUD 26 per share for now.