Insignia Financial has received a $2.7bn buyout proposal from Bain Capital after private equity firms are said to have been circling the business for some time.
Market experts believe that Boston-based Bain Capital is a credible buyer, but will need to up its offer to get shareholder approval and backing from the company.
Spheria Asset Management owns about 3 per cent of the stock, and co-founder and portfolio manager, Matthew Booker, said that the company should open the books to Bain Capital.
“We think the bid is in the ball park and the company needs to engage and prove up a sweetener, if it genuinely believes there is upside,” he said.
The company said in a statement it received the offer after the market closed on December 12.
The offer from Bain, which is advised by Bank of America, is $4 per share.
It is subject to exclusive due diligence, board backing in the absence of a superior proposal and subject to an independent expert concluding that the transaction is in the best interest of Insignia shareholders and approval of Bain Capital’s investment committee.
A deal would also be subject to the approval of the Foreign Investment Review Board and Australian Prudential Regulation Authority.
Insignia said the board was considering the proposal.
Citi has been working as Insignia’s defence adviser.
Insignia shares on Thursday closed at $3.40 with its market value at $2.3bn.
Shares in Insignia have languished despite it buying NAB’s MLC Wealth Management business for $1.4bn in 2020 and ANZ’s wealth management assets for $975m in 2017.
The financial group has often been described as undervalued, and many believe that Bain has timed its move on the company because it appears to have turned the corner under the strong leadership of Scott Hartley.
The challenge for the company has been integrating separate businesses, and some observers believed that once that happened, there would be more buyer interest.
The wealth manager, previously called IOOF, faced heavy scrutiny in the royal commission into the financial sector.
This week it announced a deal with SS&C Technologies to simplify and transform its master trust business.
SS&C will provide administration and technology services for the business.
Sources had earlier predicted the deal would probably buy Insignia chief executive Mr Hartley more time, and potentially increase Insignia’s value.
John Wylie’s Tanarra Capital is the largest shareholder in Insignia with 14 per cent, after tripling its holding since late 2022, the year when the fund started buying the stock.
In 2022, Insignia’s share price ranged from $3.43 to $3.80.
The move by Bain comes after Boston-based Bain Capital purchased aged care provider Estia last year for $838m.
Bain also owns Virgin Australia.
Insignia has group funds under management and administration of $319.6bn.
The group is not paying dividends for the first half of the 2025 financial year.
It says it has the ability to pay franked dividends from the 2027 financial year final dividend once tax payments resume.
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