ANZ’s OnePath discounted in planned sale to IOOF

IOOF will acquire ANZ pensions and investments business OnePath for $850m if it is able to clear the final approval hurdle.

New IOOF chief executive Renato Mota. Picture: Aaron Francis

IOOF has gained a $125m reduction in the purchase price for ANZ’s OnePath business after dropping termination rights that were due to be exercised today and agreeing to extend the ­already protracted approvals ­process.

The 13 per cent reduction will see IOOF acquire the ANZ pensions and investments business for $850m if it is able to clear the final hurdle of approval from the Australian Prudential Regulation Authority by as late as June 30.

The revised price includes $25m already paid to ANZ for its aligned dealer groups last year.

The board of ANZ and the trustee board for the business, OnePath Custodians, both issued “no objection” notices on Thursday that cleared two of the three approval steps. Investors cheered the deal, with IOOF shares jumping more than 10 per cent and finishing just below their intraday highs at $7.05, up 69c.

IOOF had agreed to the deal in October 2017 but the approval process was delayed by the Hayne royal commission that heard embarrassing revelations about IOOF’s conduct.

APRA subsequently imposed licence conditions on IOOF and sought to ban then chairman George Venardos, CEO Chris Kelaher and three other executives for alleged breaches of their obligations to act in superannuation fund members’ interests.

APRA accused IOOF of compensating members with their own money, rather than from its shareholder funds, over an error made by IOOF.

Justice Jayne Jagot found against APRA in the Federal court last month. Mr Kelaher has already resigned and Mr Venardos stepped down as chairman.

APRA announced on Thursday it would not appeal the decision. But deputy chair Helen Rowell said the regulator was still considering further measures to address issues raised in the case, including revising prudential standards or seeking changes to legislation to protect members’ interests.

Mr Venardos on Thursday welcomed APRA’s announcement, saying: “Today’s decision reinforces Justice Jagot’s judgment and ends this matter.”

New IOOF chief executive ­Renato Mota declined to comment on the reasons for the lower price but said there had been no deterioration in the performance of the businesses acquired.

“There were termination rights that came into effect on October 17 and we needed to find a way to create greater certainty around the transaction,” Mr Mota said.

“The revised terms reflect both ANZ and IOOF’s commitment to completing the transaction and it delivers greater certainty to ANZ P & I members and clients.”

Mr Mota said that despite a challenging operating environment for wealth management, the strategic rationale for the transaction remained compelling.

“The transaction will meaningfully increase the scale and footprint of our core business as we continue to invest in delivery of member outcomes and execute our strategy to deliver accessible, advice-led wealth management for the benefit of all Australians,” Mr Mota said.

Although a lower price for ANZ, the sale continues a staged exit from wealth management for ANZ as chief executive Shayne Elliott shrinks the bank back to its core retail and business lending.

“While there has been a reduction in the sale price, there have been offsets included and it also provides certainty for our customers and staff,” ANZ group executive for wealth, Alexis George, said.

ANZ sold its life insurance business to Swiss giant Zurich in 2017. But exits for other banks have stalled, including Commonwealth Bank shelving the sale of its wealth business earlier this year and National Australia Bank’s disposal of MLC delayed.

The revised terms on the OnePath sale include lower warranty caps for ANZ on any remediation payable to customers of the business and amendment allowing an earlier termination of the strategic alliance agreement that sees ANZ paying IOOF to provide superannuation, financial advice and investment services to its customers over 20 years.

ANZ has already provided $334m after tax for the remediation of the aligned dealer groups

Mr Mota said the deal, which will see ANZ acquire $48bn in funds under management alongside $20bn of funds under advice from around 700 aligned advisers already acquired was a key pillar of IOOF’s transformation.

He declined to comment on whether the court finding would have any bearing on APRA’s approval process.

The deal will be the first to be scrutinised by APRA under amendments to the Superannuation Industry (Supervision) Act that came into force on July 5 this year and gave the regulator approval power over controlling stakes in super assets.

IOOF submitted its final application on October 4.