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