Apollo runs eye over Westpac wealth management unit

The sale process for Westpac’s wealth management unit is moving closer to a conclusion with final bids due at the end of this month Picture: NCA NewsWire / John Gass

Apollo Global Management is thought to be the latest private equity firm to have turned up in the auction for Westpac’s wealth management unit.

The sale process is moving closer to a conclusion with final bids due at the end of this month, and the challenge for Westpac has been that as time goes on, the value of the funds under administration of the unit has been falling due to market volatility amid the inflationary environment.

The month of June was critical for bidders to see how its performance was shaping up, which was thought to have been part of the reason for the auction’s delay into this month.

Some believe a lift in funds under administration by smaller more nimble rivals Netwealth and Hub24 suggests Westpac would be losing market share.

It will be interesting to see whether Westpac makes the same call as other vendors recently and opts to hold the business until conditions improve.

But some think that if Westpac can achieve a price of at least $700m for what’s left of its wealth management arm (it was earlier expected to fetch around $1bn), it should divest the operation and move on, given the capital investment needed on improving the technology for the business.

Banks have been retreating from non-core operations to focus on mortgages and business banking.

After selling non-core wealth assets, ANZ recently came close to venturing off its main track again in recent weeks when it came close to buying accounting software business MYOB for about $4.5bn. This was quite a surprise to many and was understood to be an attempt to attract more business customers.

Any purchase by Apollo of Westpac’s wealth management unit would likely be through its retirement reinsurance company Athene, also a major shareholder in the listed retirement products provider Challenger.

Analysts say a deal conducted through Challenger would not make as much sense as Athene buying the business itself.

Apollo was not thought to be in the competition earlier on, but the deterioration in the value of Westpac’s wealth management unit could draw fresh suitors at a late stage and maintain competitive tension in the Morgan Stanley-run auction.

Some say Apollo is keen to run the ruler over various targets in the financial services space. Others also say that global groups are looking down under due to recent foreign exchange movements, with the US dollar currently buying about $1.43.

Colonial First State, owned by KKR and CBA, has been considered the frontrunner for the Westpac business, but it too would have been facing headwinds from the market conditions and whether KKR would double down on the sector, some are no longer so sure.

AMP is now thought to be on the sidelines, while Macquarie Group is not a suitor although it looked at the business earlier on.

Bain Capital had been in the running to buy the wealth manager which includes Westpac’s Panorama wealth management platform.

Already, Westpac has offloaded the superannuation operations in its wealth management arm to Mercer Australia for $225m.

Earlier, Westpac had about $140.2bn of funds on its platforms, including $105bn on its Panorama platform at March.