Jarden set for more deals after its $700m NAB wealth merger

NAB has agreed to merge its New Zealand wealth operations with Jarden’s wealth management arm. Picture: Britta Campion.

Jarden’s Kiwi mega wealth merger with NAB’s New Zealand operations buys the trans-Tasman investment bank breathing space from a financial perspective after its huge start-up costs hiring top talent has made it one of the most closely watched investment banks in Australia.

The recent collapse of a $16bn buyout of Origin Energy by Brookfield would have been a blow to Jarden, which was Origin’s defence adviser, as it would have been to the other defence adviser Barrenjoey, both of which launched on the Australian investment banking scene in 2020, hiring expensive investment bankers from shops such as UBS, JPMorgan and Goldman Sachs.

There were more than $30m of fees riding on a successful Origin deal for the banking start-ups.

Yet in what’s been a tough year for investment banks across the board, it’s not as though Jarden has been missing in action when it comes to advisory roles.

It has worked with blue chip clients such as Qantas, Woolworths (it advised on its $586m PETstock purchase approved by the competition watchdog on Thursday) and Atlas Arteria with IFM attempting to buy the business.

And it has other lucrative transactions in the wings, including a looming $1bn sale by Lendlease Communities to Stockland (of which it is advising), a $1bn-plus listing of New Zealand industrial company Mondiale, and it may still get a big payday if suitors come back for Origin Energy in 2024.

Jarden maintains its ANZ investment banking arm, consisting of about 160 frontline investment bankers, remains profitable and has a $NZ150m capital position as it moves forward in 2024 as a stand-alone entity, following its selldown of New Zealand-based wealth management.

It will recoup dividends through its 20 per cent interest in the newly-merged wealth entity, to be named FirstCape.

Jarden’s investment banking co-head Aidan Allen says the focus will be on driving profitability through the investment bank and says Jarden is comfortable with the current headcount.

But many in the market are observing closely, after it took out a $NZ60m convertible loan in the past year.

The enterprise value of the deal is about $NZ700m, with Pacific Equity Partners injecting cash into the business to gain 35 per cent, with about $245m of that loosely split towards payment to NAB and Jarden.

Jarden’s wealth unit has considered the jewel in the crown for the ANZ group.

As well as the convertible loan, Jarden has undrawn debt on its balance sheet and the funds could be used to pay down debt.

Another area where the money could go is to top Jarden staff, such as investment banking co-heads Sarah Rennie and Aidan Allen, who negotiated attractive pay packages to leave Goldman Sachs and UBS respectively and sign up to the firm.

Some are known to have foregone bonus payments while the firm’s Australian arm gets off the ground and could be owed the money.

Project Eden

Jarden was the mastermind behind what is known as ‘Project Eden’, working on the deal with NAB’s mergers and acquisitions head Ravi Aggarwal.

The plan to merge NAB’s high net worth advisor JBWere New Zealand and BNZ Investment Services businesses with Jarden Wealth and its Harbour Asset Management has been worked on for more than a year after it earlier weighed a spin off of its unit to buy the Kiwi Wealth business with FNZ.

Next on its to do list could be an acquisition of TA Associates' Fisher Funds.

The deal sees NAB own 45 per cent and Jarden 20 per cent, with Pacific Equity Partners — a long time client of Mr Allan’s — owning the remainder of the entity run by Jarden’s Malcolm Jackson, an ex Blackstone executive.

Bringing high flying wealth advisers together with their rivals to form a new company is a delicate exercise, and one can only assume a big part of nutting out Jarden’s transformational merger with NAB’s New Zealand wealth operations was establishing what retention payments would be offered to JBWere’s star advisers.

The challenge is stemming the flow of departures from the entities, where their value is largely wrapped up in the quality of their advisers.

Jarden staff owned shares in their business, which means should they leave they will not get to take their investment with them.

Another interesting aspect of the deal is whether JBWere’s relationship with Goldman Sachs fades into the distance after the Wall Street bank previously owned JBWere, but continued to offer the firm its research.

This latest transaction also throws up interesting questions about NAB’s intentions for its JBWere business in Australia.

NAB moved to point out, when announcing the Jarden Wealth merger, it remained committed to its Australian JBWere arm.

But some believe ultimately the bank will also restructure the Australian arm or sell it off in a similar way to how it has done in New Zealand.

Wealth management businesses like JBWere come with regulatory and reputational responsibility, and it’s not something some believe NAB is keen to be liable for in the future.

Others say this move by NAB was all about capitalising on the superannuation land grab playing out across the Tasman, where the country is increasingly moving towards a voluntary, work-based retirement saving scheme known as KiwiSaver, which was introduced in 2007.

The superannuation industry in Australia is far more mature.

The transaction will create a leading wealth management business in New Zealand with a combined 113 advisers, $NZ29bn ($27bn) of funds under advice and administration and $NZ15bn of funds under management, including $NZ5bn of KiwiSaver funds under management.

NAB says the merger creates the opportunity to grow the BNZ KiwiSaver Scheme by expanding product offerings, leveraging Harbour’s asset management capability and BNZ’s distribution network.

It also creates operational efficiencies through scale, supported by the simplification of processes and systems.