The Perpetual takeover bid is a thing of dreams for long-suffering shareholders in Trust Company of Australia. For Trust Company’s other suitor however, it is a nightmare.

The Lilliputian fiduciary from Victoria, Equity Trustees, has been stalking its larger rival Trust Co for seven years, yet now it has devolved from predator into prey.

As Trust Co owns 11 per cent of Equity Trustees – and Perpetual appears odds-on to swallow Trust Co – Equity Trustees has unwittingly become the next course on the Perpetual menu.

The desert after the main meal, you might say.

Equity Trustees chairman Tony Killen and his chief executive Robin Burns had finally gone public with their scrip offer for Trust Co in March.

Alas, they were too mingy. The low-ball pitch – 0.33 of an Equity share for each share in Trust Co – failed to entice Trust Co chairman Bruce Corlett and his board. Yet it put Trust Co in play, and Killen and Burns had left the door wide open for Perpetual to come over the top.

That it did this week, stumping up the regulation 30 per cent premium and a savvy two-pronged structure whereby Trust Co shareholders can opt for cash or Perpetual shares.

It is not quite a fait accompli, but close. The bid has the imprimatur of the Trust Co board. Long suffering Trust shareholders like it and the idea of rationalisation in the fiduciaries business is a compelling one.

As is de riguer in takeovers, Trust Co was shopped around when Equity Trustees went public two months ago. Besides Perpetual, IOOF is a natural buyer. Now IOOF has missed its chance to pick up Trust Co for a reasonable price; without a bidding duel that is.

Killen and Burns meanwhile have a conundrum. They can’t offer cash. Too small. And if they sweeten their scrip ratio they invite the ire of their own shareholders who would naturally recoil at the prospect of dilution.

Their present offer, at roughly an 11 per cent premium, was judged ‘reasonable but not fair’ by Trust Co’s external experts Lonergan Edwards. That is, the price was too low for Trust shareholders but, in the absence of a better offer, it was reasonable.

Now they are up against a scheme of arrangement which promises cash, or scrip, thereby presenting rollover relief for Trust Co shareholders who might be loath to pay capital gains tax on their sale – and are happy to go along for the ride with Perpetual chief Geoff Lloyd.

The one defence tactic Equity Trustees does have in its diminishing armoury is the argument that the Perpetual shares themselves are over-priced (under the scrip-bid option if Perpetual shares fall Trust Co shareholders end up with less). It surely looks a bit overpriced, but Trust Co shareholders can always take the cash option. Moreover, Perpetual shares have looked overpriced for most of their history.

As the scheme only requires 75 per cent approval and Trust Co shareholders like it, it should have little trouble getting up.

The investment company AFIC is a major shareholder in both Equity Trustees and Trust Co. And although AFIC boss Ross Barker is said to be far closer to Killen and Burns at Equity, than it is to Trust Co, and may entertain a sweetened pitch from the Tasmanian company, he can still be expected to vote rationally.

And right now, the rational outcome is a successful outcome for Perpetual, followed perhaps by a Perpetual takeover bid for Equity Trustees somewhere down the track.