Perpetual share price tumbles on full-year earnings and takeover news

The company has posted a $101 million profit and a $6.02 per share bid for its ASX 200 peer.

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Key points

  • The Perpetual share price is down 4% following the release of the company's FY22 earnings and news of a takeover agreement
  • It posted a $101 million profit – representing a 39% improvement – and a 97-cent final dividend this morning
  • Perpetual has also entered a takeover agreement that could see it snapping up the ASX 200's Pendal in a part-scrip deal

The Perpetual Limited (ASX: PPT) share price is slipping after the company dropped its full-year earnings and announced a previously speculated takeover plan.

The S&P/ASX 200 Index (ASX: XJO) financial services company has proposed to acquire fellow ASX 200 constituent Pendal Group Ltd (ASX: PDL) in a part-scrip deal worth around $2.3 billion as of Wednesday's close.

The Perpetual share price opened Thursday's session 0.5% higher at $30.44  before tumbling into the red.

Right now, the financial services provider's stock is swapping hands for $28.99, representing a 4.39% fall.

Perpetual share price falls on FY22 results and takeover plan

Here are the key takeaways from the company's financial year 2022 earnings:

  • Revenue of $767.7 million – a 20% improvement on that of the prior corresponding period (pcp)
  • Net profit after tax (NPAT) lifted 39% to $101.2 million
  • Average assets under management (AUM) lifted 41% to $107.2 billion
  • Delivered earnings growth in all four of its divisions
  • Declared a 97-cent fully franked final dividend, bringing full-year dividends to $2.09 per share – a 16% improvement

Looking to the company's individual segments, Perpetual Asset Management International, encompassing the Trillium and Barrow Hanley businesses, brought in $218.8 million of revenue in FY22 – a 57% increase.

Perpetual Asset Management Australia saw revenue lift 2% to $169 million, while Perpetual Private delivered $211.2 million of revenue – a 15% increase.

Finally, Perpetual Corporate Trust saw $158.5 million of revenue – an 18% improvement.

Perpetual proposes acquisition of Pendal

In other news driving the Perpetual share price today, the company has announced its plan to snap up ASX 200 investment management services provider Pendal.

Perpetual has proposed to provide Pendal investors with 1 Perpetual share and $1.976 in cash for each stock they hold in the takeover target.

That implies an offer price of $6.02 per share based on Perpetual's previous close. It also represents an offer price of $6.545 based on Perpetual's last undisturbed close. That's a 46.0% premium on Pendal's previous close.

The takeover would see Perpetual boast more than $201 billion of AUM. It could also realise $60 million of annual pre-tax synergies within the first two years and deliver double-digit earning per share (EPS) accretion for Perpetual shareholders in the first 12 months after implementation.

Pendal's board has recommended the offer to shareholders.

What did management say?

Perpetual CEO and managing director Rob Adams commented on today's news from the company, saying:

Perpetual has delivered a robust financial result in FY22, driven by strong earnings growth across all four of our business units.

The group has maintained a strong balance sheet position, enabling us to drive organic growth and pursue inorganic opportunities with conviction, when they are in line with our strategic ambitions and future growth potential such as our announcement today of the proposed acquisition of Pendal Group.

This defining acquisition is strategically and financially compelling, allowing us to realise our strategic ambitions significantly sooner than would otherwise occur individually, bringing forward years of growth potential.

What's next?

If all goes to plan, Perpetual will implement its Pendal acquisition by late 2022 or early 2023.

Meanwhile, Perpetual hasn't provided new earnings guidance today. Adams commented on the company's outlook:

While the macroeconomic and geopolitical conditions pose challenges for the global financial services industry, the outlook for Perpetual remains positive.

Perpetual's unique combination of businesses provides the group with diversification of earnings and growth opportunities, and a level of downside protection in times of market volatility through our nonmarket linked revenues in PCT and PP.

In addition, the strength of the Perpetual brand, built over generations as a leading provider of fiduciary services, has created a confidence and trust that gives the group a strong foundation for future growth.

Perpetual share price snapshot

This year has been a rough one for the Perpetual share price.

Today's plunge included, it's fallen 22% since the start of 2022. It has also dumped almost 30% since this time last year.

For comparison, the ASX 200 is currently down 7% year to date and 6% over the last 12 months.

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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