PwC Australia in talks to spin off units damaged by scandal – source

By Lewis Jackson and Scott Murdoch

SYDNEY (Reuters) -PricewaterhouseCoopers Australia is looking to sell its government, education and healthcare practice to private equity firm Allegro Funds, according to a person familiar with the matter, as the firm battles the fall out from a major scandal.

The scandal, which first broke in January, centres around a former PwC tax partner who had been advising the federal government on laws to prevent corporate tax avoidance and shared confidential information with colleagues who then used it to pitch to multinational companies for work.

While the scandal began in PwC’s tax practice it has tainted the more lucrative government consulting business as a growing number of departments and organisations, including the Reserve Bank of Australia, pause or review work with the “big four” professional services firm.

A term sheet for a potential deal has been drawn up, the Australian Financial Review said when it first reported the story on Friday.

The sale could include roughly 100 partners and 1,000 staff, or 10% of the firm, the AFR added. PwC Australia made A$3 billion ($2.01 billion) in revenue last financial year.

A spokesperson said PwC does not comment on market speculation when asked for a response. Allegro Funds did not immediately respond to a request for comment. The person familiar with the sale plan could not be named as the information had not yet been made public.

Allegro Funds describes itself as a restructuring specialist with over A$4 billion ($2.68 billion) under management.

Acting PwC Australia chief executive Kristin Stubbins said last month the firm would “ringfence” its government consulting business and appoint a separate board to consider “strategic options for the business”.

In a sign the scandal is beginning to impact PwC’s private sector work, four major pension funds managing roughly A$750 billion froze work with the firm this month.

($1 = 1.4914 Australian dollars)