KKR, Per­pet­ual end bid talks, fail to agree on of­fer

The Pak Banker - - Company& -

SYD­NEY: KKR & Co. ended talks to buy Per­pet­ual Ltd. for at least A$1.75 bil­lion ($1.73 bil­lion), trig­ger­ing the biggest drop in the Aus­tralian fund man­ager's shares in more than two years.

The par­ties couldn't agree on ac­cept­able terms, they said in sep­a­rate state­ments to­day. KKR won't carry out due dili­gence and Syd­ney-based Per­pet­ual doesn't ex­pect fur­ther dis­cus­sions with the New York-based buy­out firm, Per­pet­ual said.

Per­pet­ual's 15 per­cent tum­ble in Syd­ney trad­ing erased most of the gain since an­nounc­ing the ap­proach in Oc­to­ber. KKR's chal­lenge was to lock in the tar­get's se­nior in­vest­ment man­agers, led by head of eq­ui­ties John Se­v­ior, to avoid buy­ing a busi­ness left bare if key work­ers de­fect. That's not a typ­i­cal pri­vate-eq­uity in­vest­ment, said Shaun Manuell at Eq­uity Trustees Ltd.

"It didn't re­ally fit the mould," said Manuell, who helps man­age A$750 mil­lion in Aus­tralian stocks at Eq­uity Trustees in Mel­bourne. "They tend to look for steady, sta­ble cash flows and im­prove op­er­a­tional ef­fi­cien­cies. It's a dif­fi­cult model for ser­vice in­dus­tries."

Per­pet­ual shares fell to A$31.54 at the 4:10 p.m. lo­cal time close in their biggest de­cline since Oc­to­ber 2008. KKR's pro­posal was as high as A$40 a share. Be­fore the ap­proach was made pub­lic nine weeks ago, Per­pet­ual stock fetched A$30.97.

Per­pet­ual said this month it signed con­fi­den­tial­ity agree­ments with KKR and gave the pri­vate-eq­uity firm ac­cess to some data. An es­tate trustee since 1888, Per­pet­ual had said the le­gal im­pli­ca­tion of sell­ing that unit was among is­sues to re­solve be­fore a bid could be rec­om­mended to share­hold­ers.

"The par­ties have agreed that such an of­fer by KKR can­not be for­mu­lated," Per­pet­ual said in its state­ment. "Mu­tu­ally ac­cept­able terms were un­able to be de­vel­oped."

For KKR, the col­lapse of talks is at least the sec­ond fail­ure since July. That month, a group in­clud­ing Car­lyle Group and TPG Cap­i­tal beat KKR af­ter bid­ding A$2 bil­lion for Aus­tralian hos­pi­tal op­er­a­tor Health­scope Ltd. KKR bid alone, peo­ple fa­mil­iar with the mat­ter said at the time.

"KKR was sat­is­fied with the level of ac­cess and in­for­ma­tion re­ceived," Ian Smith, an Ade­laide-based spokesman for the pri­vate-eq­uity firm, said in a state­ment to­day. He con­firmed the two com­pa­nies couldn't reach agree­ment. Per­pet­ual on Oct. 15 was val­ued at 13.6 times earn­ings, 29 per­cent be­low its av­er­age of 19.2 times over the past five years, ac­cord­ing to data com­piled by Bloomberg. -Bloomberg

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