Bain blames volatile markets for walking away from $3.4bn Insignia takeover battle

Insignia shares tank after US private equity giant Bain walks away, leaving CC Capital as the sole bidder for the wealth manager.

Insignia Financial CEO Scott Hartley. Picture: Arsineh Houspian

Insignia Financial’s takeover prospects are on shaky ground after Bain Capital walked away from any deal for the wealth manager, leaving peer CC Capital as the last suitor standing.

The long-running battle for Insignia — the company was put in play in December when Bain lobbed its first bid — is not yet over but the wealth manager is unlikely to get a takeover deal done with CC Capital at its desired $5 a share price when its stock is trading at much lower levels, analysts warn.

Insignia ended Tuesday’s session at $4 a share but the stock crumbled as much as 15 per cent on Wednesday, to $3.25, after it revealed Bain would no longer proceed with a binding offer, citing volatile markets for the decision to walk away.

Insignia has previously indicated $5 a share was at the lowest price it would consider any takeover offer but CC Capital is now in a much stronger negotiating position, Morningstar analyst Shaun Ler said.

“If CC Capital stays around, then they’re the only party to negotiate with and so they’ll have more power (to negotiate a lower price),” Mr Ler told The Australian.

Mr Ler said he would put fair value for Insignia at $3.90 a share compared to the $5 a share indicative offers lobbed by Bain and CC Capital in early March that valued the company at $3.4bn.

Insignia on Wednesday said Bain Capital had stepped away from the tussle for Insignia, with the private equity giant saying it was “unable to proceed at this time with making a binding offer for the company, due to the macro uncertainty caused by the volatility in global capital markets”.

The letter from Bain is understood to have referenced higher funding costs due to recent market volatility.

But Mr Ler noted volatility had eased since April, including in recent days when the US and China announced a 90-day ceasefire in their tariff war.

“Credit spreads are now below their three-year averages, the VIX index is also in line with its three-year average. The US and China are working towards renegotiating their trade deals, so if things continue to progress, then volatility would subside further,” he said, adding that he had not yet written off a deal being done between Insignia and its remaining suitor.

Ten Cap co-founder Jun Bei Liu said the chance now of a deal at $5 a share was virtually nil.

“When there was the disconnect in the bond market in early April, the expectation was the deal would be repriced. I thought it might be kept repriced to $4.50 or low $4s, just given Insignia’s earnings are linked to markets. But now that we’ve seen Bain walk away without even making any offer, it does put some risk on whether there will be any deal,” she said.

Insignia remains in discussions with CC Capital, which has advised that it continues to actively work towards making a binding bid for the company over the coming weeks.

The exclusivity period for CC Capital expires at the close of business on May 15.

“There is no certainty that the ongoing discussions will result in any transaction being put to Insignia Financial shareholders for their consideration,” the company told shareholders.

Chinh Chu

Among Insignia’s shareholders is John Wylie’s Tanarra Capital, which holds about 15 per cent of the company. Mr Wylie has previously indicated $5 a share is the floor price he would support.

CC Capital’s negotiations on price will likely include Mr Wylie. The suitor would be unlikely to put forward a binding bid without hoping for his support, sources said.

New York-based CC Capital, led by former Blackstone senior executive Chinh Chu, is going after Insignia more than three years after the PE firm bid for wealth manager MLC in 2020. MLC is now a subsidiary of Insignia, which plans to relaunch the MLC brand this year as part of its five-year strategy.

Rivals Bain Capital and CC Capital pulled out in front in the bidding war for Insignia in March, upping their offers to $5 a share for the wealth giant and leaving third contender Brookfield in the dust.

The revised bids for Insignia were a 9 per cent lift on the $4.60 a share last offered by the suitors in January and a 25 per cent jump on the initial $4 a share lobbed by Bain in December that put Insignia into play. The higher offer also got Bain and CC Capital exclusive due diligence for a number of weeks.

But since the bidders made their offers for the ASX-listed Insignia, global markets have been roiled by Donald Trump’s trade war and tensions between the US and China that have only this week been put on pause.

Insignia is being advised by Citigroup and Gresham Advisory Partners on financial matters related to its takeover defence, while King & Wood Mallesons has been engaged for legal advice.