IOOF goes into trading halt ahead of major announcement

IOOF chief executive Renato Mota. Picture: Stuart McEvoy

IOOF is on the cusp of lobbing a binding bid for National Australia Bank’s MLC Wealth, after the financial services firm on Thursday entered a trading halt pending the announcement of “a potential significant transaction”.

The wealth firm is understood to have reached the second round of the auction for MLC, after submitting an indicative bid for NAB’s wealth business in recent months.

Buying MLC for an expected price tag of up to $3bn would be a mammoth move by IOOF, which has a current market cap of around $1.6bn.

The Australian’s DataRoom column first revealed on August 3 that IOOF had emerged as an unlikely contender for the MLC business.

IOOF’s last major acquisition was ANZ’s OnePath Pensions and Investments business, a deal done under former chief executive Chris Kelaher back in 2017. That purchase, originally agreed for the sum of $950m, was completed earlier this year for $825m after IOOF renegotiated a better price.

IOOF has a long acquisitive history, buying up numerous funds management businesses over the years and earning itself the nickname ‘Pac man’.

At the helm for 10 years before falling under a cloud of controversy following a disastrous appearance at the financial services royal commission, Mr Kelaher built IOOF up to be one of the nation’s wealth advice giants.

Taking the helm in late 2018, first as interim CEO before being officially appointed to the role months later, IOOF’s current CEO Renato Mota has pursued a strategy of simplifying the business, while attempting to restore both its performance and reputation.

In the past year, IOOF has divested its stakes in Ord Minnett, Perennial Value Management, New Zealand-based IOOF Integral Master Trust, and most recently, Australian Ethical.

Its current brands include Bridges Financial Services, Shadforth, RI Advice, millennium3 and Lonsdale, among others.

At the company’s half-year results in February, Mr Mota said the group’s transformation was not yet complete.

“We want to capitalise on the transformation opportunity ahead,” he told The Australian.

“The job is not done. The transformation agenda ahead is a challenging one… we are not deluding ourselves.”

IOOF’s reputation took a beating at the Hayne royal commission, with Mr Kelaher defending its practice of using member money when compensating them for its mistakes.

Three years earlier, it had been embroiled in another scandal, with a Fairfax Media investigation alleging insider trading, false release reports and cheating on compliance exams.

MLC, likewise, was roasted at the 2018 royal commission for failing to act in clients’ best interests, including by charging advice fees when services weren’t provided.

After originally announcing its intention to spin off MLC in 2018, NAB was last year forced to push out its plans for its wealth arm as it dealt with customer remediation in the wake of the royal commission.

MLC’s auction originally attracted private equity firms, including Kohlberg Kravis Roberts, which was earlier the frontrunner to buy the operation but has since withdrawn from the competition.

IOOF is considered to be a “bottom feeder” in the wealth market when it comes to acquisitions, and strong operational synergies are not thought to exist with bringing the operations together.

MLC has $154bn of assets under management and the sale comes after NAB sold 80 per cent of its life insurance business within MLC to Nippon Life in 2016 for $2.4bn.

Other firms including JC Flowers have been in the contest to buy MLC through adviser JPMorgan, but some have suggested it was not a serious contender. CC Capital has also been looking but is known to be keen to buy the business at an opportunistic price.

MLC has been up for sale through Macquarie Capital and Morgan Stanley.

An IOOF spokesman declined to comment on the matter. A NAB spokesman also declined to comment.

IOOF’s shares last traded at $4.63. It is due to exit the halt on or before Monday, when it is also expected to hand down its full-year result.