ANZ sale to IOOF could be shelved

ANZ has not ruled out walking away from the sale of its pensions and investments business to under-fire wealth group IOOF.

ANZ has not ruled out walking away from the sale of its pensions and investments business to under-fire wealth group IOOF after it delayed a key vote on the transaction but said it was engaging “vigorously” with the buyer.

ANZ deputy chief executive Alexis George said the sale contract with IOOF was amended to ensure the separation of the bank’s life insurance unit — sold to Swiss giant Zurich — could occur before any final decisions on the pensions business were made.

While sticking to the controversial deal for now, Ms George didn’t rule out ANZ shelving the sale of its pensions business to IOOF as the latter fights banning orders against four executives and its chairman and works to meet licence conditions imposed by the banking regulator.

“At this point it is too early to make a call. We just have to wait and give them (IOOF) time,” Ms George said.

“There is a lot of water to go under the bridge. On the IOOF side, we just have to monitor what is happening with the regulator.”

The deal, which was agreed on in October 2017, has to be signed off by the ANZ superannuation company’s independent board of trustees as being in the best interests of its 700,000 members, which is difficult given IOOF is in the crosshairs of the banking regulator. The ANZ parent entity board must also give the transaction the green light.

The companies revealed the contract change in separate ASX statements yesterday, confirming a report in The Australian that foreshadowed ANZ had delayed a key vote by the trustees on the divestment. Sources said the vote, which was due to happen in February, was unlikely to occur before May.

The ANZ’s ASX statement did not disclose a new completion date for the pensions sale, but IOOF’s market notice suggested the transaction would complete “later this calendar year”. Initially, the parties wanted the transaction done by the end of March.

On the deal completion timing, Ms George said: “At this time we have no timing for a vote.”

Making the transaction even more complex is the fact that ANZ and IOOF entered into an arrangement that saw an initial $800 million go to the bank in a payment that signalled “substantial economic completion”. ANZ agreed to pay interest on a debt note in return until the superannuation business was separated from its life insurance division.

In its statement yesterday, IOOF said it continued to “work co-operatively” with ANZ and that the bank would continue to pay interest on the debt note until separation of the super businesses, now due to occur by July.

The announcement buoyed IOOF’s stock yesterday, sending it 2.8 per cent higher to close at $5.56, while ANZ’s shares were up 0.7 per cent at $25.54.

Shaw and Partners senior analyst Brett Le Mesurier said the parties appeared to be working towards a solution, but he warned of further delays to any completion of the ANZ pensions deal with IOOF.

“Both companies are clearly keen for the sale to occur. There could be further delays in view of the hurdles ahead,” he said.

The initial $975m deal included two parts: the sale of the pensions and investment division and of ANZ’s financial planner dealer groups. The dealer groups transitioned to IOOF in October last year.

IOOF’s prospects were dealt a severe blow in December when the Australian Prudential Regulation Authority hit the firm with legal action and licence conditions.

The court action alleges IOOF chief executive Chris Kelaher, chairman George Venardos, finance boss David Coulter, company secretary Paul Vine and general counsel Gary Riordan are not fit and proper people to run a superannuation company.

After the action became public non-executive director Allan Griffiths was appointed acting IOOF chairman while wealth management boss Mr Renato Mota became acting chief executive. Mr Kelaher and Mr Venardos are on leave while the matter is contested.

It is scheduled to be heard in July.

IOOF labelled APRA’s ­allegations “misconceived” and said they would be “vigorously defended”.

On the ANZ transaction, Mr Mota said: “We continue to work towards the effective completion of the initiatives outlined on December 21, 2018, in relation to the APRA licence conditions.

“We remain confident that completion of the pensions and investments acquisition should be able to occur shortly after the successor funds transfer completion and we will continue to work co-operatively and constructively with ANZ to achieve this outcome.”