The Pendal takeover will create a $200b asset manager, so why is the Perpetual share price tanking?

The Perpetual Ltd (ASX: PPT) share price finished the day more than 8% in the red on Thursday, closing the session at $27.75.

The drop marks a 52-week low for the company, despite announcing its FY22 results before the open today as well.

Noteworthy is that Perpetual also announced its planned takeover of Pendal Group Ltd (ASX: PDL), a move that would create an asset management giant with more than $200 billion in assets under management (AUM).

Perpetual pursues Pendal

In addition to its FY22 earnings, the company advised its intention to acquire Pendal in a part-scrip/part-cash consideration.

Under the proposal, Pendal shareholders would receive 1 Perpetual share plus $1.976 in cash for each share they held.

The mathematics of the deal values Pendal at approximately $6.02 per share on today’s quotes.

This represents a 13% premium to Pendal’s closing price today (note, Pendal gained 8% today as well) and a 23% premium to its closing price on Wednesday.

If successful, the newly formed entity would oversee more than $200 billion in AUM.

The deal is also accretive to earnings per share (EPS) for Perpetual and could deliver double-digit earnings growth once integrated.

Pendal CEO, Deborah Page said the transaction would bring together “two iconic financial services firms”.

“We believe this is a compelling opportunity for shareholders and the business alike”, she added.

The combination will deliver a significant increase in scale, boost our position in an increasingly competitive global market and bring strategic benefits in the dynamic sectors in which we operate, both domestically and internationally.

Meanwhile, Perpetual CEO, Rob Adams said the “defining acquisition” was both “strategically and financially compelling”. He continued:

[The deal allows] us to realise our strategic ambitions significantly sooner than would otherwise occur individually, bringing forward years of growth potential.

Despite the perceived benefits, investors were less than impressed by the news and compressed the Perpetual share price deep into the red today.

This sent prices tumbling to 52-week closing lows by the end of the session. This brings losses to more than 31% for the past 12 months.

Returns for each security are seen on the chart below.

The post The Pendal takeover will create a $200b asset manager, so why is the Perpetual share price tanking? appeared first on The Motley Fool Australia.

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More reading

• Here are the top 10 ASX 200 shares today
• Why City Chic, Flight Centre, Perpetual, and Woolworths shares are sinking
• Why Deep Yellow, IDP, Pendal, and Qantas shares are soaring today
• Pendal share price soars 15% on takeover news
• Perpetual share price tumbles on full-year earnings and takeover news

Motley Fool contributor Zach Bristow has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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