Bain to look under Insignia hood after upping offer

Insignia has granted suitor Bain Capital limited due diligence after the PE firm matched rival CC Capital’s offer for the wealth manager.

Insignia Financial will open its books to Bain Capital in the hopes of enticing a higher offer from the suitor.

Insignia Financial will open its books to Bain Capital in the hopes of enticing a higher offer from the suitor – and potentially heightening the bidding war with rival CC Capital.

Insignia on Thursday said it would give Bain a limited period of due diligence to some of its non-public information after the US-based private equity firm upped its offer for the wealth manager to $4.60 a share, matching the latest bid by PE peer CC Capital.

“In order to determine if Bain is able to formulate a further improved proposal from that reflected in the Bain second revised indicative proposal, Insignia Financial has offered to provide to Bain a limited period of access to certain non-public information on a non-exclusive basis,” the wealth manager told shareholders.

Access is subject to certain conditions, including that Bain sign a confidentiality and standstill agreement.

The company’s stock jumped more than 2 per cent in morning trade, to $4.52 a share, its highest point since October 2021, but fund managers questioned Bain’s move to match, rather than better, its rival’s offer.

“Clearly, Insignia has shown a preference for CC Capital, because Bain will presumably pull the business apart, while CC Capital has indicated they’ll leave management to run the business. Bain just simply matching shows a level of arrogance,” Tribeca Investment Partners portfolio manager Jun Bei Liu told The Australian.

“I think CC Capital may not offer more. They already know they’re the preferred bidder so why would they,” she said.

Earlier this week, Insignia granted CC Capital a limited period of due diligence to some of its non-public information, on a non-exclusive basis.

Insignia opening its books to the suitors comes as its second-quarter update showed funds under management and administration rose $7.2bn, or 2.2 per cent, to $326.8bn by the end of December.

Total net inflows for the quarter were $2.3bn, driven by net inflows into MLC Expand and the asset management business, which were partly offset by outflows from Master Trust and legacy Wrap products.

ASX-listed Insignia cautioned on the uncertainty of any deal going ahead. “The provision of limited due diligence does not guarantee that the Bain second revised indicative proposal will result in a binding offer or one that is capable of being recommended by the board of Insignia Financial,” the company said..

Still, allowing both Bain and CC Capital to look under the hood could deliver a step-up in the bidding war that has seen the offer price lift from the initial $4 a share Bain lobbed at Insignia in December.

CC Capital exceeded this initial bid earlier in January, lobbing an offer of $4.30 a share, which was quickly matched by Bain before CC Capital came back with the current high bid of $4.60, now again matched by Bain.

Potential buyers, meanwhile, will need Australian Prudential Regulatory Authority approval, with industry watchers warning the regulator is on watch over superannuation trustees.

The battle for Insignia is the first major takeover play in Australian markets this year.

The interest from overseas suitors – both Bain and CC Capital are US-based – comes as the Australian dollar sits around US62c, well below its long-term average.

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.

Shortly after Bain and CC Capital lobbed their initial bids, Morgan Stanley raised its price target for Insignia to $4.40 on the longer-term potential for the firm to establish a profitable footprint in the wealth sector.

“But for now Insignia is in outflows, revenue margins are falling and the prolonged costly complexity of integrating two bank wealth businesses is causing a big disconnect between reported and underlying earnings,” said the analysts, led by Richard E. Wiles.

“We do not expect dividends over the next two years (fiscal 2025 and 2026) given cash constraints from accelerated below the line spending and potential repayment of sub-debt,” they cautioned.

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

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