Perpetual share price leaps 11% on $3.5 billion Soul Patts takeover rejection

Perpetual's board believes the Soul Patts takeover offer materially undervalues its businesses.

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The Perpetual Ltd (ASX: PPT) share price is soaring 10.9% in morning trade on Thursday to $26.34 a share.

And the Washington H Soul Pattinson & Company Ltd (ASX: SOL) share price is down 0.7% to $33.70 a share.

This comes after investment house Soul Patts announced a takeover offer for the financial services company after market close yesterday.

A takeover offer that was rejected by Perpetual later in the evening.

Here's what's happening.

Perpetual share price rockets on acquisition news

The Perpetual share price is flying higher today after Soul Patts submitted a non-binding, indicative offer to acquire 100% of the company's shares that it does not already own.

Soul Patts pointed to an announcement from Perpetual earlier yesterday surrounding the potential separation of the company's Corporate Trust and Wealth Management businesses from its Asset Management business.

Soul Patts, Perpetual's largest shareholder, said it supported this idea.

Its proposal would see the demerger of Perpetual Asset Management, with Soul Patts retaining 100% of the Perpetual Wealth Management and Perpetual Corporate Trust businesses. Soul Patts would also assume responsibility for all of Perpetual's net debt and stranded group costs.

Under the proposal, Perpetual shareholders would receive an equity value equivalent to $27 per share. That's 13.6% above the Perpetual share price of $23.76 at market close yesterday.

Soul Patts said the total enterprise value of its offer comes out to $3.53 billion.

Soul Patts offer rejected

However, the Perpetual board believes the offer undervalues the potential of the Perpetual share price and rejected the proposal.

Management confirmed that confidential discussions had taken place, but they decided to unanimously oppose the deal for a number of reasons.

They said the proposal "materially undervalues Perpetual, and its Corporate Trust and Wealth Management businesses", and it's conditional on a demerger of the Asset Management business.

The board also noted the takeover offer "introduces significant execution and operational risk over a protracted implementation period".

Perpetual shareholders do not need to take any action at this time.

Stay tuned!

Motley Fool contributor Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia has positions in and has recommended Washington H. Soul Pattinson and Company Limited. 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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