Australian financial services firm Perpetual has terminated discussions with private equity group Kohlberg Kravis Roberts & Co. (KKR) regarding the A$2.2bn ($1.4bn) sale of its wealth management and corporate trust units.
The company is planning to pursue a separate sale of its wealth management business.
The decision follows an independent expert’s report, which concluded that the deal announced in May 2023 was not in the best interests of shareholders.
Perpetual had previously flagged concerns in December 2023 after receiving adverse tax guidance from the Australian Taxation Office (ATO).
The Australian firm confirmed that it has withdrawn its recommendation for the scheme of arrangement with KKR and has formally terminated the Scheme Implementation Deed (SID).
Perpetual CEO and managing director Bernard Reilly said: “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.”
No break fee is payable under the terms of the agreement, though KKR has asserted that a break fee is due and has reserved the right to seek further damages. Perpetual has rejected this claim.
Since the ATO’s December feedback, Perpetual and KKR have engaged in discussions on revised non-binding indicative proposals from KKR.
However, after a comprehensive review, Perpetual determined that the revised proposals, including the associated conditions, did not align with shareholders’ best interests, leading to the end of negotiations.
Perpetual stated that it aims to maximise long-term shareholder value by maintaining its high-quality businesses, which have strong market positions and offer organic growth opportunities.
The company intends to continue executing its business separation programme to create standalone and autonomous businesses. It will also implement a new operating model for its asset management division and an enhanced cost-reduction strategy.
Perpetual will move forward with the sale of its wealth management business, which serves high-net-worth clients and provides fiduciary and philanthropic services.
Proceeds from the sale will be used to strengthen the company’s capital position and support growth in its corporate trust and asset management divisions.
The firm also reaffirmed its focus on reducing debt in the short to medium term. The sale of the wealth management unit, alongside cost-cutting measures, is expected to bolster its capital position.
