In further indication of the pressure being put on fund managers by passive investment providers, multi-disciplinary fund manager Perpetual has levied a $2.4 billion takeover bid for competitor Pendal.
The multi-disciplinary fund and wealth manager Monday offered one Perpetual share for every 7.5 Pendal shares plus a $1.67 cash consideration on Monday, implying an offer price of $6.23 per share.
The Perpetual offer comes at a premium on the current share price of Pendal, which is partly attributable to the latter losing over 40 per cent in its share value over the last half-year. The last time the share closed near $6.23 was 26 November, 2021 ($6.22).
Of course, Pendal is not alone in its struggles, with fund managers all over the world under pressure to justify fees in a market where ETF providers have a decade of broad-based market outperformance to show off.
Perpetual itself has lost roughly a fair chunk of its share value in the past five years, although the listed group has held steady in the last 24 months.
Passive investment now takes up over half the world’s assets under management, with monolithic ETF providers Blackrock and Vanguard taking an increasingly greater slice of the pie traditional fund managers used to have to themselves.
The ascendancy of passive investment houses, however, is a phenomenon that could stall at any moment. With markets riding high for such a sustained period the potential for a correction is high, which would (theoretically) give active managers the opportunity to flex their asset management muscles – especially those that sell themselves on downside protection.
According to Pendal, the two “highly complementary businesses” would provide the usual triumvirate of M&A advantages: synergy, scale and leverage. Immediately, the Perpetual team stated in an ASX release, the deal would create a “clear leader in the Australian asset management market”.
With a “world class distribution network”, Perpetual believes a merged entity would create value for shareholders in both companies.
“The combined group will be well placed to grow its asset management businesses across all key markets and channels, gain improved leverage and scalability across a unified business platform, delivering high quality client service, greater innovation, whilst meaningfully enhancing the growth profile of both companies,” the release stated.
