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AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED

(ANZ)
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IOOF becomes Australia's top retail wealth manager with $1 bln purchase of NAB unit

08/30/2020 | 08:23pm EDT

SYDNEY, Aug 31 (Reuters) - Australia's IOOF Holdings Ltd said it will buy National Australia Bank Ltd's financial advisory arm for A$1.4 billion ($1.1 billion), making it the country's biggest retail wealth management firm.

The deal underscores a dramatic reshaping of Australia's retail finance industry after a public inquiry exposed regulatory scandals at the country's top lenders, forcing them to carve off non-essential businesses. Both IOOF and rival AMP Ltd, the country's oldest wealth advisory firm, were also hit hard by the inquiry.

The purchase of MLC, which follows IOOF's acquisition of wealth management assets from Australia and New Zealand Banking Group Ltd last year, will take its number of financial advisors to 1,884 in total, topping AMP's 1,847.

It will also have the most retail funds under management - A$196 billion compared to Bankers Trust's A$153 billion and AMP's A$141 billion.

"We sincerely believe that this is ... transforming the shape of the industry," said IOOF CEO Renato Mota on an investor call.

NAB CEO Ross McEwan, who took the helm last December, said the deal would let the bank "focus on executing our refreshed strategy of delivering simpler, more streamlined products and processes".

Australia's No. 3 lender put MLC on the market in 2018 then shelved the sale a year later as it sought to replace the bank's previous CEO in the wake of the industry inquiry.

The pricetag is lower than MLC's book value of A$1.86 billion, according to NAB, but bumps up the bank's surplus cash by A$220 million.

"The divestment of MLC ends a 20 year 'failed marriage'," said Credit Suisse analysts in a research note, adding it also meant NAB would likely to be able to continue to pay dividends at a time when it is pausing loan payments due to shutdowns caused by the new coronavirus.

Shares of IOOF were in a trading halt while it seeks to raise A$1.04 billion in cash from institutional and other investors to pay for the purchase. NAB shares were up 0.6% in morning trade, in line with the broader market.

The purchase price for MLC was 17.3 times cash earnings for the 2020 financial year - more than the 15.5 multiple for a similar earnings metric that KKR & Co Inc is paying to acquire a 55% stake in Commonwealth Bank of Australia's pension business.

($1 = 1.3576 Australian dollars) (Reporting by Byron Kaye and Paulina Duran in Sydney and Rashmi Ashok in Bengaluru; Editing by Edwina Gibbs)


© Reuters 2020
Stocks mentioned in the article
ChangeLast1st jan.
AMP LIMITED 1.24% 1.22 End-of-day quote.-21.79%
AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED -1.53% 28.25 End-of-day quote.24.45%
AUSTRALIAN DOLLAR / US DOLLAR (AUD/USD) -0.11% 0.77054 Delayed Quote.0.17%
COMMONWEALTH BANK OF AUSTRALIA -0.48% 101.36 End-of-day quote.23.44%
CREDIT SUISSE GROUP AG 0.27% 9.578 Delayed Quote.-16.02%
IOOF HOLDINGS LTD -1.12% 4.4 End-of-day quote.25.00%
KKR & CO. INC. -2.14% 55.29 Delayed Quote.36.55%
NATIONAL AUSTRALIA BANK LIMITED -0.60% 26.46 End-of-day quote.17.08%
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Financials
Sales 2021 17 594 M 13 567 M 13 567 M
Net income 2021 6 110 M 4 711 M 4 711 M
Net Debt 2021 - - -
P/E ratio 2021 13,7x
Yield 2021 4,91%
Capitalization 79 821 M 61 604 M 61 548 M
Capi. / Sales 2021 4,54x
Capi. / Sales 2022 4,35x
Nbr of Employees 37 844
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Shayne Cary Elliott Chief Executive Officer & Executive Director
Shane Buggle Chief Financial Officer
Paul Dominic O'Sullivan Chairman
Gerard Florian Group Executive-Technology
Michael Liarakos Chief Compliance Officer