Fund manager Perpetual (ASX: PPT) has announced that it’s making a US-based acquisition for $465 million. It will use a capital raising, debt and cash to fund it.
The $465 million US acquisition
Perpetual has announced it’s going to acquire a 75% interest in US-based asset manager Barrow, Hanley, Mewhinney & Strauss (BHMS) for $465 million.
Investment and management team members will retain their 25% ownership, which should hopefully mean strong alignment and continuity for BHMS’ clients and Perpetual.
BHMS is a global investment management business with around US$44.1 billion, or AU$63.9 billion, in funds under management (FUM) across US, global and emerging market equities and fixed income mandates.
Perpetual said that the acquisition will be transformational to accelerate global growth, diversify its investment capabilities and build world class distribution capabilities.
The acquisition price represents 8x pro forma EBITDA (click here to learn what EBITDA means). It’s expected to add more than 20% to underlying profit/earnings per share (EPS) on an annual basis from the date of completion, which is expected by the end of the first half of FY21.
Capital raising
Perpetual will carry out a fully underwritten institutional placement of $225 million at a price of $30.30. This is a 9.8% discount to Perpertual’s last closing price last week.
The new placement shares issued will represent 15.7% of Perpetual’s existing shares.
Regular shareholders will be able to buy up to $30,000 of Perpetual shares as part of this capital raising.
Summary
The fund manager also said that it expects to report a statutory profit of $82 million and underlying profit of $93.5 million. This sounds like a good acquisition for Perpetual in the shorter term. In the longer term it will depend which way FUM and earnings are heading. If I already liked Perpetual and I was a shareholder I’d be tempted to buy more shares, but I think there are better ideas out there for growth.
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