IOOF likely to divest Antares as it assesses MLC assets

IOOF chief executive Renato Mota. Picture: Stuart McEvoy

Speculation is mounting that IOOF could be about to put some of the assets on the market it has inherited from the NAB as part of its $1.4 billion MLC acquisition.

The $2.36 billion Australian wealth manager and service provider IOOF won clearance from prudential regulator APRA this month to buy NAB’s superannuation and wealth advice division MLC after already receiving the go-ahead from the Australian Competition & Consumer Commission.

Some suggest MLC’s business Antares Capital has been earmarked for divestment and will come up on offer once IOOF sifts through what it wants to keep or divest.

Antares has more than $34.8 billion of assets under management, including $6.3 billion in Australian equities and at least $28.5 billion in fixed income.

Its equities and fixed income operations are managed in two separate divisions.

It could sell for a price in the low hundreds of millions of dollars, say market experts.

The other part of MLC that IOOF may offload is its boutique funds management business specialising in global equities, Intermede Investment Partners.

Analysts say the Antares Capital business and Intermede do not fit naturally into the portfolio of IOOF, which sold similar sorts of businesses before it purchased MLC.

IOOF offloaded a 52.4 per cent interest in Perennial Value Management in 2019 and also sold its 70 per cent holding in private wealth manager and broker Ord Minnett for $115 million to a consortium embarking on a management buyout.

 

One analyst said IOOF did not see itself as an asset manager, with the attraction of buying MLC being to integrate the business into the wealth management operations of IOOF.

Parties that may buy up the divestments could include those like financial planning group Pinnacle or the operations could be subject to management buyouts.

The acquisition of MLC, which had over $170 billion of assets under management at December, has proved to be contentious, with some of the view it may have overpaid on the transaction and could struggle to deliver on its planned synergies.

 

For the six months to March, NAB reported that MLC’s cash earnings were $56m.

Analysts at Morningstar said in a recent report that the logic of the MLC acquisition was to take advantage of Australia’s mandatory superannuation contribution requirements and ageing demographics that increases the demand for retirement savings and financial advisers.

Its reputation had been damaged at the 2018 financial services royal commission, where the company was heavily criticised for its conduct, prompting the departure of then boss Chris Kelaher and legal action by APRA against the business.

But Morningstar said this had not impacted the company’s ability to attract funds or financial advisers.