PPT -9.44% PDL +8.40%: The takeover took a more definitive step today as we thought it would on the day that Perpetual (PPT) reported FY22 results, which quickly became a secondary concern. The deal is framed as a takeover worth $6.016 for PDL based on yesterday’s close on PPT, however, as PDL shareholders, we’ll receive some PPT stock and some cash which at the closing price today is worth $5.635. The deal is 1 PPT share for every 7.5 PDL shares held plus a cash component of $1.976. For those inclined, the formula to use to trade the prices would be PPT stock price (27.44) / 7.5 + 1.976 = 5.6347. There is now an arbitrage opportunity for hedge funds who short PPT and buy PDL considering ~34.5c differential, however as shareholders in Pendal we simply need to ascertain the value in the combined entity from here. We think the deal makes sense, scale is important and the sum of the parts will be greater than the two separate entities as they stand.
MM remains long PDL in the Income Portfolio – holding our position
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