Perpetual Limited (ASX:PPT) is in exclusive talks with KKR & Co. Inc. (NYSE:KKR) on the sale of its corporate trust and wealth management businesses, with the global private equity giant a preferred bidder over a joint tilt from TA Associates and EQT. The Australian's DataRoom column first revealed that KKR was in talks for the Perpetual assets in December, with the private equity giant firming up as the favourite in recent weeks.

Perpetual's shares jumped more than 3% on 29 April 2024, closing at $24.02. Perpetual has been running the sale process on its corporate trust and wealth management divisions for a number of months after it received a $3 billion bid from Soul Patts last year. Soul Patts is Perpetual's largest shareholder with about 12%.

Perpetual's response to that proposal was that it undervalued its business. A strategic review of its operations, announced by Perpetual in December as it fobbed off Soul Patts' advances, was aimed at unlocking value from its corporate trust and wealth divisions following its $2.5 billion acquisition of rival Pendal Group earlier in 2023. Offloading the corporate trust and wealth arms would see Perpetual become a pure-play asset management offering.

The wealth manager has beefed up this side of the business in recent years, including through bolt-on acquisitions Trillium and Barrow Hanley. But the asset management operation has endured its own challenges amid the flight to passive investing. In a quarterly update last week, Perpetual said it had suffered $5.2 billion in net outflows in the March quarter, with $2.2 billion flowing out from a single strategy.

The bulk of the outflows - $3.5 billion - were pulled from boutique J O Hambro Capital Management, with its UK Dynamic strategy losing $2.2 billion over the three months after portfolio manager Alex Savvides left the group. There is no certainty of reaching a binding agreement with KKR, or that any transaction would proceed, Perpetual said, adding that any transaction would be subject to conditions including regulatory approvals. Exclusivity runs out on May 7, with Perpetual expected to provide an update by the following day.

Luminis Partners, Bank of America and Goldman Sachs are advising Perpetual on the strategic review and sale process. KKR is advised by Jefferies.