Wealth manager Perpetual (ASX: PPT) is one step closer to taking over The Trust Company (ASX: TRU), after the Australian Competition and Consumer Commission (ACCC) decided not to oppose the takeover.
Trust Co provides trustee and wealth management services, financial and estate planning to both retail and corporate customers. Perpetual is better known as a fund manager, with close to $25 billion in assets under management.
The company has also agreed to divest the 13.4% stake in rival bidder Equity Trustees (ASX: EGT), currently held by Trust Co, to appease the regulator.
“After a thorough investigation, and subject to the undertaking to divest the shareholding in Equity Trustees, the ACCC’s view is that this acquisition is unlikely to lead to a substantial lessening of competition in any relevant market,” ACCC chairman Rod Sims said.
The combined company will become the largest provider of trust services in Australia, after Perpetual entered an agreement with IOOF Holdings (ASX: IFL) whereby IOOF will buy Trust Co’s stake in Equity Trustees.
That puts the spotlight firmly on Equity Trustees as the next takeover target, as the industry consolidates. Trust Co shareholders are expected to receive 0.182 Perpetual shares for each Trust share, along with a fully franked special dividend of 22 cents per share.
Trust could also pay shareholders an interim fully franked dividend of up to 17 cents a share on top of the offer from Perpetual. But Trust shareholders also have the ability to receive shares, cash or a combination of both, depending on which offer suits their individual circumstances.
With Australian superannuation sitting at around $1.6 trillion, there’s plenty of demand for professional finance managers to manage all aspects of Australian consumers’ finances, including those outside super. As the super pool has grown, it has become a lucrative business to be in, and we could see more mergers and acquisitions by the larger wealth managers.
It’s no wonder then that Perpetual, IOOF and Trust Co are all trading at premium P/E ratios of over 20, while Equity Trustees is trading at 17 times earnings. Foolish investors may want to add Perpetual and IOOF to their watchlist, and keep an eye on Equity Trustees.
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Motley Fool writer/analyst Mike King doesn’t own shares in any companies mentioned.
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