Shares of the ASX-listed Perpetual Limited (AU:PPT) fell today after the company revealed a tax hit of AU$488 million related to its proposed acquisition by KKR & Co., Inc. (KKR). This could result in a significant decrease in shareholder proceeds. In addition to the tax update, the company released its trading update for the first quarter of FY25, showcasing strong performance. However, shareholders reacted negatively to the tax impact, causing the shares to fall by 8.4% in today’s session.
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Perpetual is a financial services firm offering investment advisory, financial planning, and corporate trustee services, among other solutions. Meanwhile, KKR is a U.S.-based investment management company.
Perpetual Faces Major Tax Challenge
According to the company’s statement, the Australian Taxation Office (ATO) has applied section 45B of the Income Tax Assessment Act 1936 to the scheme. This implies that the entire cash return will be treated as an assessable unfranked dividend for shareholders, subject to taxation at the applicable rate for each individual.
As a result, Perpetual’s assessed primary tax liability could reach AU$488 million, excluding any additional penalties and interest. At the same time, the estimated range of tax and duties has increased from AU$106 million–AU$227 million to AU$493 million–AU$529 million. Moreover, the projected cash proceeds to shareholders have decreased from AU$8.38–AU$9.82 per share to AU$5.74–AU$6.42 per share.
Perpetual expressed disappointment with ATO’s views and is discussing the potential impact on the transaction with KKR.
Perpetual Reports Q1FY25 Trading Update
In addition to the tax setback, Perpetual provided a brief update for the first quarter of FY25. The company’s Asset Management segment saw a 3% increase in assets under management (AUM), reaching AU$222.3 billion. Similarly, funds under administration grew by 1% to AU$1.2 trillion for its Corporate Trust division, and Wealth Management’s funds under advice rose by 3% to AU$20.4 billion.
Is Perpetual a Buy or Sell?
On TipRanks, PPT stock has a Strong Buy consensus rating based on four Buys assigned in the last three months. The Perpetual share price target of AU$23.47 implies a growth of 17.35% from current levels.
