Sydney-based funds manager and custodian, Perpetual has sort of said ‘go away’ to US private equity firm Kohlberg Kravis Roberts, but not too far.
In fact all that Perpetual made clear yesterday is that the current indicated price range of $38 to $40 a share in KKR’s approach earlier this month isn’t enough to get it interested in talking any further to the Americans.
But it has given the Americans every chance to improve on their first offer
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Perpetual said yesterday this price level does not reflect the company’s value.
But Perpetual said it would engage in talks with KKR to see whether a workable bid can be developed, and to discover KKR’s intentions for the business.
To keep KKR on the hook and interested, Perpetual told the ASX that it was prepared to grant KKR "limited financial information", subject to confidentiality agreements.
This indicates the Perpetual board might be interested, if the price is right.
Perpetual shares closed at $37.90, up 23c, yesterday after the statement.
Perpetual’s AGM will be held in Sydney today.
In its response to the KKR approach, Perpetual said that, after assessing the approach with its financial and legal advisers, "the Board considers that the proposed price in the range of $38.00 – $40.00 per share does not reflect Perpetual’s value.
"Nevertheless, the Board believes that shareholders’ interests are best served by conducting exploratory discussions with KKR in order to assess better the Indicative Proposal which, at this point, remains incomplete," Perpetual said.
"These discussions should allow the Board to establish (whether) an offer that would deliver acceptable value to Perpetual’s shareholders is likely to be formulated."
The statement said Perpetual’s board wanted to "understand… KKR’s intentions as a prospective owner and operator of the business…"
"Perpetual will advise shareholders as to the outcome of the discussions with KKR as soon as is practicable.
"It should be noted that this process may take some time and there can be no certainty at this stage that an acceptable proposal will eventuate," the company said.
And shareholders in clothing and bedware retailer Pacific Brands Ltd were told yesterday that they can expect the struggling company to resume paying dividends later this year.
The AGM in Melbourne yesterday was told that its transformation program was ahead of schedule and has generated some meaningful reductions in its cost of doing business.
Cash generation is improving and according to chairman James MacKenzie the balance sheet was strong.
"Our transformation program, Pacific Brands 2010, remains on track and is actually one year ahead of schedule in delivering cost savings," Mr MacKenzie said.
"The board and senior management are confident in the outlook and notwithstanding that trading conditions may remain challenging in the near term, we expect improving EBITA (earnings before interest, tax and amortisation) before significant items in F11(the 2011 financial year).
"Circumstances permitting, we are also likely to achieve a return to dividends during the next six months."
"It is the Board’s current intention to resume the payment of dividends out of the profits for the six month period ending 31 December 2010, with a target payout ratio of at least 50% of net profit after tax.
"Your board will also continue to consider other forms of capital management if and where appropriate."
Mr MacKenzie said the exchange rate headwinds of the past 12 to 18 months were now at the company’s back, with rates largely locked in for the coming year.
"Those exchange rate benefits combined with further transformation benefits should outweigh the impacts of pricing adjustments, increasing product costs out of China, temporary supply constraints and cost-of-doing-business reinvestment in F11," Mr MacKenzie said.
Pacific Brands chief executive Sue Morphett said trading over the first quarter had been encouraging but it was too early to confidently predict what that would mean for the full financial year.
Furthermore, reported sales growth would continue to be affected by past divestments and the ongoing brand rationalisation strategy.
Shares in Pacific Brands fell 1.5 to $1.11 yesterday on a day when the wider market was up 1.3%.
It seems investors were not that impressed.
