Sotiriou had previously encouraged Pendal to accept the takeover offer and said the justification for rejection was “weak”. “We aren’t confident that the Pendal board is acting in the shareholders’ best interest and not their own. We see the shareholders of Pendal as having a better outcome from the instant uplift in the share price and from the synergies,” he said.

However, Morningstar analyst Shaun Ler supported Pendal’s decision. He agreed the offer was too low and the takeover could potentially create more outflows if Perpetual’s cost-stripping was too severe. “You might cut costs but you would also lose your revenue. Clients could withdraw money.”

Alongside the takeover rejection, Pendal released two separate statements announcing a share buyback and soft funds under management for the quarter. The $100 million on-market share buyback is designed to strengthen the company’s share price, which has more than halved since the company was listed on the ASX in 2007.

Pendal also reported its funds under management had fallen by $800 million in the three months March 31. Across Australia and the US, Pendal reported outflows of $500 million and $1.8 billion respectively but saw $700 million in inflows from the Europe, UK and Asia businesses.

Perpetual has been on an acquisition spree, buying US investment firms Barrow Hanley and Trillium Asset Management in recent years, as chief executive Rob Adams seeks to transform the traditionally Australian-stock focused investor into a global giant.

The firm has not indicated whether it will offer a higher price to acquire Pendal.

Stockbroking firm Bell Potter released a note to clients last week claiming the proposal made strategic sense. “Walking away, perversely might weaken management, unless they can demonstrate strong results in the next year, and given recent trading, that may be tough.”

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