Why did the Perpetual share price just plummet 14%?

The Perpetual Limited (ASX: PPT) share price is tumbling on news of its planned takeover of fund management business Pendal Group Ltd (ASX: PDL).

Early this morning, the companies announced a change to the consideration mix on the table for the takeover target. Later, they revealed a court decision related to a hypothetical breach cost.

It comes after a consortium upped its bid for Perpetual to $33 per share last week. While the bid was ultimately rejected, it seems to have spurred concern about Perpetual’s planned acquisition of Pendal.

The Perpetual share price is down 14% at the time of writing, trading at $27.16.

Let’s take a closer look at the latest from the financial services firm.

What’s going wrong for the Perpetual share price?

The market is bidding the Perpetual share price lower on Thursday on the back of a flurry of news regarding its takeover bid for S&P/ASX 200 Index (ASX: XJO) financials peer Pendal.

First, news broke the pair had agreed to revise the mix of cash and scrip initially put forward to acquire Pendal. The offer price on the table hasn’t changed alongside the mix.

If the deal goes ahead, Pendal shareholders will now receive one Perpetual share for every seven Pendal shares they hold, as well as $1.65 cash per Pendal share.

Originally, Perpetual offered one share for every 7.5 Pendal shares and $1.976 cash per share.

Perpetual said the new terms “further strengthen the balance sheet and enhance the financial flexibility for the combined group”.

Additionally, the companies announced a court decision regarding a ‘break fee’ today.

The Supreme Court of New South Wales declared a $23 million break fee — which Perpetual would be elegible to pay Pendal if it abandoned the takeover — would not be an exclusive remedy. Pendal said:

This means … Pendal [could] seek orders to enforce Perpetual’s obligations to complete the scheme, including by way of injunctive relief or orders of specific performance.

That’s likely a relief to Pendal shareholders but worrying to those invested in Perpetual stock. An improved acquisition proposal for the latter could impact its deal with the former.

The post Why did the Perpetual share price just plummet 14%? appeared first on The Motley Fool Australia.

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Motley Fool contributor Brooke Cooper 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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