Five banks tapped for CC Capital’s $3.3bn Insignia Financial play

Deutsche Bank was an adviser and lender to CC Capital for its $3.3bn buyout of Insignia Financial. Picture: AFP

Private equity firm CC Capital tapped five banks to fund its $3.3bn buyout proposal for the listed wealth manager, CC Capital.

Providing funding for the deal was Deutsche Bank, UBS, Santander, Nomura and Natixis.

Insignia stunned the market on Tuesday when it announced that private equity firm CC Capital had agreed to buy it for $4.80 per share.

At 10 times earnings before interest, tax, depreciation and amortisation, it was far higher than predicted, and there were doubts any deal would eventuate.

Bain Capital first bid, at $4 per share on December 12, and CC Capital and Brookfield arrived weeks later as suitors with the indicative offers for the company reaching $5.

But both Bain and Brookfield walked away after conducting due diligence.

Six months on and many doubted whether a deal would eventuate, as CC Capital was the last left and was still to put forward a final offer.

The bid was 56.9 per cent higher than the group’s undisturbed share price of $3.06 on December 11.

Advising on the transaction were Deutsche Bank, Macquarie Capital and law firm Ashurst, while Insignia had Citi working as its investment bank.

DataRoom last week reported that CC Capital was understood to have locked in leveraged finance groups to fund its bid for Insignia, a $2.6bn listed financial company.

Shares fell sharply on Monday, closing down about 5.7 per cent to $3.93 when the company said it was still in talks with CC Capital, leaving shareholders sceptical as to whether a transaction would transpire.

Based on where the share price had earlier been trading, the market had expected an offer over $4 per share when the company a bit over two weeks earlier said that a final offer by CC Capital was expected to land by late last week as it finalised funding.

Insignia chief executive Scott Hartley has close ties to CC Capital, as he aided the US-based private equity firm with its efforts to buy NAB’s wealth manager, MLC, in 2020 when it was up for sale; Insignia bought the business for $1.4bn or 9.9 times EBITDA.

Sources say that they were impressed by his efforts, which implies Mr Hartley, who previously ran wealth management at AMP, may have had a role in swaying the private equity firm when it came to paying up for the business.

The question on shareholders’ minds has been where earnings growth would come from with Insignia, after costs had been stripped from the business – so the offer is likely to gain overwhelming support from patient investors who have held on and hoped for an improved performance from the company’s turnaround plan.

CC Capital joined the contest for Insignia on January 3 by offering $4.30 per share, then lifting the bid on January 17 to $4.60 per share cash before moving to $5 along with its rival bidders.

Insignia provides a range of financial services including advice, investment management, superannuation, and estate and trustee services.

When previously called IOOF, it was a focus of the royal commission into the financial services industry due to its corporate governance and conflicts of interest.

Its performance also suffered from years of bolt-on acquisitions that were not adequately integrated.

As a result, it has significantly underperformed its financial peers on the ASX, trading at just over $2 per share in early 2024.

It has more recently been in the rebuilding phase.

The outcome is good news for industry peers hoping to sell at a high price.

KKR purchased 55 per cent of wealth manager Colonial First State at a price equal to 9.5 times EBITDA and is expected to be in search of an exit.

Westpac previously tried to sell its wealth management platform business, BT Panorama, but opted to retain it.

Perhaps it now reconsiders; one option could be a demerger or float similar to its BT Wealth Management business which performed strongly as a stand-alone entity on the ASX.