Perpetual's take-over offer for The Trust Company will be allowed to proceed after the Australian Competition and Consumer Commission (ACCC) stated it would not oppose the proposed acquisition, despite it creating the largest trust services provider in the Australian market.
However the ACCC also stated the acquisition was unlikely to lead to a decrease of competition in the trust services market. The competition watchdog accepted a court-enforceable undertaking from Perpetual to sell the 13.4 per cent stake of Equity Trustees held by The Trust Company within a confidential, specified time period.
Perpetual has already indicated that it would sell, with ACCC approval, the shares to IOOF at $16.50 per share within five days of the implementation of the Scheme of Arrangement between Trust and Perpetual. This price is the closing price for Equity Trustee shares traded on the Australian Stock Exchange.
In handing down its decision, ACCC chair Rod Sims stated "the ACCC considers that a merged Perpetual and The Trust Company will be the largest provider of trust services in Australia" but would be constrained by market forces.
Sims described these market forces as competition from existing suppliers as well as new market entrants, and the power of corporate customers to build trust services in-house or sponsor new entrants to market if they were not happy with existing trust services.
In the document detailing the undertaking to sell the shares the ACCC stated it was concerned that without such measures Perpetual may be able to raise prices and recoup any lost profit from customers moving to Equity Trustees through dividends it would receive as a shareholder. It also stated that without the divestment Perpetual may have the ability to influence or gain insight into Equity Trustee's operations by using the stake to seek board representation.
The ACCC's decision follows a review of the trust services sector, including extensive market inquiries among a large number of customers of trust services by the ACCC. The ACCC stated that "the vast majority of those customers expressed no concerns about the proposed acquisition".
IOOF managing director Chris Kelaher said the decision to purchase the Equity Trustee shares would provide "a strategic investment in a business we understand extremely well" and would provide IOOF with a greater exposure to the Australian trustee industry.
Perpetual and Trust announced that a shareholders meeting would be called in late November with an expected merger date in early December.