My interpretation is that the court has ruled that Pendal may seek specific performance or injunctive relief in addition to the break fee of $23 million if Perpetual were to walk away from the Pendal acquisition deal. Looks very similar the Elon Musk - Twitter scenario!

It makes the Pendal valuation tricky being mostly script based and the Perpetual share price has gone into free fall after the announcement, down over 14%.

I wonder what tomorrow will bring?

Disc: Sold PPT over past week, holding PDL IRL.

Court Update on Scheme Implementation

Perpetual Limited (“Perpetual”) (ASX:PPT) announces that the Court has today provided its decision regarding the scope of the Perpetual Board’s fiduciary carve out in the Scheme Implementation Deed (SID) for the Scheme of Arrangement with Pendal Group (“Pendal”) (ASX:PDL).

In response to Pendal’s application to the Court, Perpetual sought a declaration from the Court to clarify the scope of the Perpetual Board’s fiduciary carve out in the SID.

This morning, the Court declared that the payment of $23 million, should the Perpetual Board seek to exercise its fiduciary carve out in the SID, does not exclude Pendal’s right to seek specific performance or injunctive relief. This is the case even if the Perpetual Board determines that it is in the best interests of its shareholders for Perpetual to do so.

The Court did not determine whether it would actually grant an injunction or specific performance in those circumstances. This would be a matter of discretion for the Court to consider on the specific facts should a Perpetual major transaction arise which Perpetual’s Board wished to pursue.

It is important to note that the transaction with Pendal is continuing and as announced earlier today the parties have agreed certain changes to the terms of the SID.

Perpetual would like to thank the Court for considering this important matter which enables greater clarity for both parties and the market as we progress this transaction.

Perpetual will continue to keep shareholders informed in line with its continuous disclosure obligations.

Following an earlier announcement today, in relation to Pendal and Perpetual agreeing to an amendment to the Scheme Implementation Deed when they met yesterday (see below), Pendal has now asked for a temporarily pause in trading pending a further announcement.

Following yesterday’s hearing, Pendal is expecting the Court to clarify the remedies available in the situation where Perpetual breaches the Scheme Implementation Deed or indicates that it will do so. This clarification from the court is expected today, and may be the reason for this temporary pause in trading.

Changes to Scheme Implementation Deed

Yesterday, Perpetual and Pendal agreed to make the following changes to the Scheme consideration mix:

• an increase to the scrip component of the Scheme consideration to 1 Perpetual share for every 7 Pendal shares; and
• a reduction of the cash component of the Scheme consideration to $1.650 per Pendal share. The cash consideration of $1.650 per share will be reduced by the 3.5 cent per share FY22 final dividend payable on 15 December 2022,

(together, the Revised Consideration Mix).

The Pendal and Perpetual Boards have agreed the Revised Consideration Mix to further strengthen the balance sheet and enhance flexibility of the combined group.

Based on Perpetual’s closing share price of $31.58 as at close of business today, 16 November 2022, the Revised Consideration Mix has an implied value of $6.161,2 which is broadly equivalent to the implied value of the SID Consideration Mix of $6.187.3 The value of the Revised Consideration Mix will continue to fluctuate with changes to Perpetual’s share price.

Disc: Held IRL

Here’s a good example of how to put a positive spin on a negative outcome. As I was reading the CEO commentary I was wondering if I was looking at the same table! :D

ASX Announcement - Pendal Group Funds under Management (FUM) for the quarter ended 31 March 2022

Sydney, Australia, 12 April 2022 - Pendal Group Limited (ASX: PDL) today announced its funds under management (FUM) for the March quarter at $124.9 billion.

Group CEO Commentary

Pendal Group CEO, Nick Good, said, “This quarter we are pleased to have seen a significant improvement in flows despite weak and volatile markets that have impacted overall fund levels.

“Of particular note were positive flows into EUKA segregated mandates, including a sizable additional investment from St. James’s Place.

“Our diversified book of businesses means we are well positioned to offer clients the range of investment strategies they require to meet their changing investment needs.

“Pendal has some of the most respected investment talent in the world, a compelling global distribution footprint and a diversified product suite including a growing range of sustainable and impact solutions. We are also making solid progress on our multi-year investment program. I have confidence our strategic priorities will deliver long-term organic growth.”

 Key quarterly movements

• There was a turnaround in flows in EUKA with segregated mandates attracting positive flows of $1.0 billion, primarily in the Global Opportunities strategy
• There were positive flows in to TSW’s International Equities and Multi-Asset strategies offset by a sub-advisory client redemption totaling $1.2 billion in a low-margin fixed-income account in TSW’s Core Plus strategy
• Fund flows in Australia were slightly down, with a small level of portfolio adjustments and Westpac outflows of $0.2 billion in line with expectations.

Pendal Australia performance fees

As at 31 March 2022, the status of Pendal Australia’s performance fees for the performance year ending 30 June 2022 is $6.2 million. The performance fees will not be determined until the end of the performance period and remain highly variable until that time.

Disc: Held IRL

The writing was on the wall. I have been adding Pendal shares recently, but not enough. I think it is an absolute bargain at the moment and is paying a 9% dividend yield based on the closing price last week.

ASX Announcement - 4/4/22

Pendal receives conditional, non-binding indicative proposal from Perpetual at indicative value of $6.23 per share

Pendal Group Limited (ASX: PDL) (Pendal) announces that it has received a conditional, non-binding indicative proposal (the Indicative Proposal) from Perpetual Limited (ASX:PPT) (Perpetual) to acquire 100% of the shares in Pendal by way of a Scheme of Arrangement.

The Indicative Proposal is for a consideration of 1 Perpetual share for every 7.5 Pendal shares plus $1.67 cash for each Pendal share. This represents an indicative value of $6.23 per Pendal share (based on the closing price of Perpetual shares on the ASX on 1 April 2022).

The value of the Indicative Proposal will fluctuate daily in line with the Perpetual share price. Based on the proposed component of scrip consideration, Pendal shareholders would own approximately 48% of the merged entity.

The indicative value of $6.23 per Pendal share represents:

• a premium of 0.3% to Pendal’s VWAP for the 180 days prior to 1 April 2022;
• a premium of 21.9% to Pendal’s VWAP for the 90 days prior to 1 April 2022;
• a premium of 35.4% to Pendal’s VWAP for the 30 days prior to 1 April 2022; and
• a premium of 39.2% to Pendal’s closing share price on 1 April 2022.

The Indicative Proposal is subject to a number of conditions, including but not limited to:

• due diligence;
• negotiation and execution of transaction documentation;
• receipt of all applicable regulatory and other approvals; and
• no material adverse change to Pendal.

The Pendal Board notes that the Indicative Proposal has been put forward at a time when significant geo- political instability, the economic impacts of the ongoing COVID-19 pandemic and broader market volatility has disrupted the global markets in which Pendal operates. This has materially impacted the trading values of global asset managers which may not currently reflect their long-term potential to deliver attractive returns to investors.

The Board of Pendal has commenced an assessment of the Indicative Proposal, considering the value of Pendal on a strategic and control basis. The Board is also carefully assessing the outlook for Perpetual and the proposed combined group given the significant scrip component of the proposed consideration.

The Board will consider all of these factors to ensure it acts in the best interests of shareholders as it assesses the Indicative Proposal as well as assessing alternative opportunities for Pendal.

The Directors will keep shareholders and the market informed of further developments as they occur. Shareholders do not need to take any action at this time.

The Board of Pendal has appointed Macquarie Capital as its financial adviser and King & Wood Mallesons as its legal adviser in relation to the Indicative Proposal.

Disc: Held IRL