Good evening,

While Perpetual and its advisers consider first-round bids for the corporate trust and wealth units, investors are turning their minds to alternative methods of unlocking value.

The 138-year-old financial services giant has lined up a handful of credible bidders for its up-for-sale businesses, not least KKR’s wealth giant Colonial First State, buyout fund TA Associates and Swedish private equity firm EQT.

But, like with the Pendal acquisition, Street Talk is starting to hear from the naysayers, pooh-poohing the break-up altogether. In their view, the Bank of America/Goldman Sachs-led sale process feels rushed and they’re not convinced it will unlock value. To add insult to injury, fundies have lost faith in chief Rob Adams, and what he will do once he gets his hands on the sale proceeds. (Then again, will he be there a year from now?)

Complaining is easy, but the critics have thrown up an alternative: demerge the Asset Management from the rest of the business (aka Wealth and Corporate Trust), and list two separate entities. A demerger, they say, could help Perpetual skirt the capital gains tax issue. The parent’s debt load could be supported by the stronger Corporate Trust/Wealth business.

The idea has merit and doesn’t look all that different to what Washington H Soul Pattinson had proposed. The investment conglomerate and major Perpetual shareholder wanted to acquire the wealth and corporate trust units in a scrip deal, while assuming the debt and stranded group costs. The asset management unit would be left owned by existing Perpetual shareholders. But it does run the risk that splitting Perpetual into two small listed entities could see them get left behind by the market.

For now, Perpetual has Bank of America (wealth), Goldman Sachs (corporate trust) and Luminis Partners (all-of-company) in its corner. Two data rooms are being run consecutively with first-round offers due last week. KKR’s CFS has thrown its hat in the ring, Street Talk reported on Sunday.

Perpetual is expected to update the market on the indicative interest in late February.

Read the full story tomorrow and more on the Street Talk page.

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