What KKR's bid for Perpetual could mean for investors


Perpetual's recent decision to engage in exclusive talks with KKR to sell its Wealth Management and Corporate Trust divisions, which is set to fetch a substantial $2.175 billion in cash, undoubtedly signifies a juncture in the company's journey.

But what implications does this hold for Perpetual's future, and is now the opportune time to consider it as an investment opportunity?

Interestingly, Perpetual's share price experienced a notable 7% drop following the announcement.


This reaction suggests a degree of scepticism, with some viewing the divestment of key business arms as a potential concern rather than a positive development. However, if the deal comes to fruition, Perpetual will gain significantly.

Firstly, the company would become debt-free, instantly strengthening its financial position and potentially paving the way for more favourable financial outcomes in the future.

Additionally, focusing solely on asset management could drive efficiency and strategic alignment, ultimately delivering long-term value for shareholders.

Throw in a treasure trove of capital available to deploy for new projects and expansion, and you can see why there is real potential for Perpetual ahead.

Turning to the share price, which currently hovers around $20, it's worth considering the historical significance of this price level.

Dating back to 1999, each time the stock has dipped to $20, it has consistently rebounded, often yielding substantial gains of more than 100%. This historical pattern suggests the potential for Perpetual's share price to rise in the years ahead.

As such, I will be watching with interest the progression of talks with KKR and, as always, I encourage you to analyse the chart of Perpetual to look for confirmation that the share price is ready to rise.

What are the best and worst-performing sectors this week?

The best-performing sectors include Utilities, up more than 4%, followed by Information Technology, Real Estate and Energy, which are all up more than 2%.

The worst-performing sectors include Consumer Discretionary, down more than 0.5%, followed by Healthcare and Financials, which are both slightly up 0.5%.

The best-performing stocks in the ASX top 100 include Liontown Resources, up more than 14%, followed by AGL, up more than 10%, and NEXTDC, up more than 7%.

The worst-performing stocks include Block Inc., down more than 6%, followed by JB HiFi, down more than 5%, and Whitehaven Coal, down more than 2%.

What's next for the Australian stock market?

With the All Ordinaries Index rising more than 2% by Wednesday of this week, the buyers' message is clear: This is still their market. However, on Thursday, the sellers came back to erode around half of the gain of the previous three days.

In last week's report, I highlighted that the market was at a critical point, given that neither the buyers nor the sellers had the upper hand, setting the stage for a significant move, either up or down.

While a rise of more than 2% this week certainly qualifies as the anticipated decisive move, is it sustainable?

It will be interesting to see where the market finishes on Friday, as a high close will indicate the market is more bullish, while a low close might indicate we have more downside to come.

What's intriguing is that the odds favour a market downturn rather than an upturn, especially given that May historically tends to be a negative month. Given this, I am still not ruling out a move down to 7,500 points in May, even though it's less likely given this week's strong move.

What is interesting is that the move up this week pushed the XAO solidly past the key 8,000 point threshold, which had posed a challenge in recent weeks.

If the market can close to stay above this level, I believe there's a good chance it could hit new all-time highs by the end of May. That said, we need to be patient and wait for confirmation, as jumping in too early could result in losses.

I suggest those looking to buy take a closer look at the Utilities sector, which had its best week since October 2023 this week, and is the second-leading sector in terms of performance this year.

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Dale Gillham is chief investment analyst at Wealth Within Limited (AFSL 226347). He also serves as the head trainer at the Wealth Within Institute (RTO 21917). He has more than three decades of experience in the investment industry, and is the author of How to Beat the Managed Funds by 20%, Dale's qualifications include an Advanced Diploma and a Diploma of Share Trading and Investment. He co-hosts the Talking Wealth Podcast, and his work has appeared in The Australian Financial Review, New York Business Journal, Wall Street Select and more.