The sale of a stake in the Commonwealth Bank’s Colonial First State wealth management business to Kohlberg Kravis Roberts is unlikely to gain approval until December, according to sources.
The situation is expected to further delay the sale of Westpac’s $1bn wealth management operation through Morgan Stanley.
Earlier, the thinking was that Westpac would launch its wealth management sale next month.
However, KKR is one of the keenest suitors and is not in a position to buy that operation until it has wrapped up the $1.7bn acquisition of a 55 per cent interest in CFS, which was agreed to in May last year.
In its third quarter update about a month ago, CBA said the CFS transaction, which needs approval from the Australian Prudential Regulation Authority and the Foreign Investment Review Board, would probably not occur until the second half of this year, but now it seems it will not happen until December.
The delay is believed to relate to a backlog of cases at APRA.
As a result, Westpac is expected to push back the sales process for its wealth management unit until at least the third quarter of this year, and if it wants KKR to remain in the race, it may have to wait until the final three months of 2021.
KKR is believed to have held prolonged talks with Westpac about buying its wealth management operations once it finalises its CFS purchase.
Private equity is cashed up and keen to deploy funds, as evidenced by BGH Capital’s $1.3 billion bid for the Australian-listed global software provider Hansen Technologies on Monday.
KKR worked with Bank of America when acquiring the Colonial First State interest.
The wealth unit includes the Panorama and Asgard platforms, Superannuation and Investments and BT Life, which is being sold in a separate process.
Colonial First State has old platforms that need replacing, which it could do with Westpac’s.
When the transaction was announced, CBA and KKR said they intended to undertake “a significant investment program” that would strengthen CFS “as one of Australia’s leading retail superannuation and investments businesses”.
Some have suggested that about $500m is being spent disconnecting the business from the bank.
CBA in 2018 sold the bulk of Colonial First State Global Asset Management to Mitsubishi UFJ for $4.2bn. It sold its insurance businesses CommInsure Life and Sovereign to AIA for $3.8bn.
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