AMP is expected be in IOOF’s sights if the latter succeeds in buying NAB’s wealth manager MLC, according to market analysts.
IOOF entered a trading halt on Thursday pending the announcement of a significant transaction.
Talk that IOOF was interested in MLC was revealed by DataRoom on August 3.
IOOF, a financial planning business, counts Citi as an adviser.
While it remains in the running to buy MLC it is not clear it will succeed.
Should it win, the understanding is that a major equity raising will be launched to fund the deal.
IOOF declined to comment on its interest when approached by DataRoom at the beginning of this month.
Funding has always been considered an issue for IOOF when it comes to buying MLC, given NAB’s business was thought to have a price tag of up to $3bn and IOOF has a market value of only $1.63bn.
One option is for NAB to fund the MLC transaction for IOOF.
IOOF is considered to be a bottom feeder in the wealth market when it comes to acquisitions, and there are not thought to be strong operational synergies in bringing the operations together.
But NAB’s MLC and AMP have always been considered a logical fit and AMP has tried to buy MLC in the past.
With AMP on its knees, it is not in a position to embark on such a transaction.
Macquarie Group is known to be keen on AMP’s bank and its asset management business, AMP Capital, but not its wealth management business.
However, the wealth management business is a good fit for both IOOF and MLC.
It would probably be affordable for IOOF, given that it is considered to be the most challenged part of the company and could come with further liabilities linked to historical missteps taken by the financial planners at AMP in the past.
This could pave the way for a group such as Macquarie or a private equity firm such as Blackstone to acquire the remaining operations.
MLC has been up for sale through Macquarie Capital and Morgan Stanley.
Major private equity firms had been circling the business, but they have now staged a retreat.
Kohlberg Kravis Roberts was earlier the frontrunner to buy the operation but has since withdrawn from the competition.
MLC has $154bn of assets under management.
The sale comes after NAB sold 80 per cent of its life insurance business within MLC to Nippon Life in 2016 for $2.4bn.
JC Flowers has been in the contest to buy MLC through adviser JPMorgan, but some have suggested it is not a serious contender.
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