Perpetual’s ticking tax bomb

G’day.

Welcome to Point Blank.

Today’s brief:

• Perpetual’s $2.2bn deal triggers a $500m unfranked dividend bill.

• HSF's partner made headlines for an offensive tweet on the synagogue attack.

• A ransomware group has captured 250GB of client data at a Brisbane law firm.

 💼 Practice Points

• Perpetual’s $2.2bn carve-up plan has detonated a $500m tax bomb—more than double its initial estimate. The deal, which would see private equity giant KKR acquire Perpetual’s corporate trust and wealth management arms (along with its iconic name), is now under scrutiny after the ATO deemed the proceeds an unfranked dividend under section 45B of the Income Tax Assessment Act. Perpetual plans to dispute the assessment, citing strong legal advice and precedence.

• Calling all insolvency lawyers—ASIC has updated its regulatory guide to help directors avoid insolvent trading. The new guide includes clearer guidance on seeking professional advice and more details on the safe harbour provisions. Check out the updated guide here.

• Under the new Wholesale Market Monitoring and Reporting Guidelines, the AER is expanding its powers under the National Electricity Law to directly gather information from electricity and gas market participants rather than relying on public sources. Participants must provide quarterly and annual reports, including commercially sensitive details on OTC contracts and PPAs.

• The Australian Prudential Regulation Authority (our financial regulator) is leading the charge to ditch contingent convertible securities—the same instruments wiped out at Credit Suisse. The goal? Swap out Additional Tier 1 capital for cheaper, sturdier options to better absorb financial shocks. The move comes after supportive feedback for the proposal. The market for AT1s is ~$40bn, with the Big Four banks each holding ~1.5% of their risk-weighted assets.

🏘️ Word on the Street 

• HSF is in damage control after senior partner Damien Hazard posted a “deeply offensive” tweet in the wake of the Melbourne synagogue attack. In his now-deleted tweet, Hazard took aim at Jeremy Liebler of Arnold Bloch Leibler, accusing him of politicising the tragedy by inventing a link to anti-Israel protests. Safe to say, HSF’s PR team is having a very long day.

• A ransomware group has hit Brissy’s Nicholsons Solicitors, making off with a whopping 250GB of client data, including client corro and sensitive bank details.

• Saritha Andrews, a former barrister of Francis Burt Chambers, is in hot water after the LPBWA suspended her practising certificate for allegedly practising without one between Oct 2023 and Mar 2024.

• The Law Council of Australia has elected their new exec team, with Juliana Warner leading the pack as President. Ms Warner was posted at HSF for over 30 years before taking the gig.

📢 Talking Points

• HECS debt indexation is now capped at the lower of CPI or WPI, thanks to new legislation (Universities Accord (Student Support and Other Measures) Act 2024).

• UniMelb is handing out a $72m backpay package to 25,000 casual academics after admitting its "words-per-hour" and "time-per-student" pay models were unlawful. The university now acknowledges these benchmarks were woefully inadequate, leaving many casual academics unpaid for the hours they worked.

• Energy is shaping up to be a major election issue. The CSIRO is taking aim at Peter Dutton’s nuclear plans, arguing that the cost of large-scale nuclear plants will far outstrip renewables over time—even if solar and wind farms need to be rebuilt every 25-30 years. The Coalition, however, isn’t backing down, rejecting the CSIRO's findings and insisting nuclear will be the cheaper option for power.

• A new report says that 1 in 3 Aussie workers could be disrupted by AI in the next 5 years without policy action, warning that Australia’s reliance on raw material exports and lack of high-value industries could leave it trailing behind other OECD nations.

🏦 The Treasury

🤝 Deal Room

• Omnicom and Interpublic have struck a US$13.25bn all-stock deal in a blockbuster merger that could shake up the advertising world. The deal will create the globe’s largest ad-holding company, raking in more than $20bn in revenue.

• Why did the Regal-Platinum merger die? AFR reports Platinum’s expectations were wildly optimistic—despite Platinum’s weak investment performance, they thought Regal would significantly sweeten the offer, but Regal’s small offer price bump was quickly rejected. With the Platinum board unwilling to budge and doubts over how much value Regal could salvage, Regal walked away. Platinum, see it differently: the scrip-based offer required as much due diligence on Regal as Regal did on them. Ultimately, Platinum’s board, led by Guy Strapp, just didn’t see the two businesses meshing.

• Sonic Healthcare is doubling down on its European expansion, agreeing to buy one of Germany’s largest medical lab groups for $700m. This move is part of a bigger acquisition spree as earnings recover from a post-pandemic slump.

🏗 Sector Specific

Diggers

• CEFC is facing backlash over a $75m (A$117m) investment in RCF, a private equity fund led by the controversial James McClements, chairman of MinRes. Adding fuel to the fire, CEFC’s WA director, Jacqueline Lane (who worked at RCF until 2022), played a key role in the deal. CEFC insists all governance protocols were followed and Lane made the proper disclosures. But still, the optics aren’t great.

• Rio Tinto is pledging to slash emissions in half by 2030, with up to $6bn earmarked for decarbonisation over the next 9 years. The mining giant says it could face A$940m in annual carbon penalties by 2040 if it doesn’t act now.

Fin

• McKinsey is forking out US$122m (A$190m) to settle with the US and South Africa after the firm allegedly paid bribes to secure lucrative consulting contracts with South African state-owned companies between 2012 and 2016.

Tech & Media

• Square Peg Capital has led a $4m seed round for GoodWork.ai, an Aussie retail analytics startup building AI tools for global retailers' merchandise, finance, and operations teams.

• China’s come for Nvidia, launching an antitrust probe into the 2020 Mellanox deal, accusing the AI giant of not playing fair. As the chip giant faces probes in the U.S. and EU, it’s clear Nvidia’s AI dominance isn’t sitting well with anyone.

• Media tycoon Rupert Murdoch’s bid to rewrite his family trust and cement eldest son Lachlan’s grip on the media empire has hit a wall. A Nevada probate commissioner ruled against the move on Saturday in the US. The Murdoch empire spans Fox News, The Wall Street Journal, The New York Post, The Australian, The Daily Telegraph and Sky News Australia.

Retail & Real Estate

• Crocs’ Jibbitz unit is suing an Aussie company for patent infringement after the company sold knock-offs of its signature shoe charms.

• Honda's been hit with a $13.6 million damages bill after admitting it ended its 5-year contract with a dealer two years early. The judge found that the dealer would’ve sold 2,600 new cars had the contract been honoured.

🧠 Word Guess

• Held for another, concealed cleverly (7)

  Answer: Trustee