Mercer poised to buy Westpac’s super business

Corporate super fund administrator Mercer Australia is set to snap up Westpac’s BT Super unit, according to sources.

Corporate super fund administrator Mercer is poised to announce the acquisition of Westpac’s BT Super unit, according to sources.

It is understood that the corporate super fund manager will also purchase Advance Asset Management, which is a subsidiary of Westpac.

Mercer was tipped to buy the business by DataRoom on May 18.

Westpac’s super business manages $45.4bn of funds.

It is understood that Mercer will buy fund of funds business Advance Asset Management, but when it comes to BT Super, Mercer will take on the business through a successor fund transfer where it makes no payment to secure the business.

The superannuation unit is part of Westpac’s broader BT Panorama wealth management platform that is also for sale through investment bank Morgan Stanley as it moves to offload its wealth management operations.

DataRoom revealed plans to sell the superannuation book separately to the wealth management unit last year.

Advance started as the funds management brand for Advance Bank and is now the brand for a multi-manager investment business and it generates income by selecting superannuation fund managers. It pays a wholesale price for an asset manager then sells it to a retail fund manager.

Market experts believe it would likely sell for a small sum.

The merits for Mercer to take on the Westpac’s super businesses is that it can double its scale in corporate and retail superannuation by transferring customers onto its own platform.

Mercer is a dominant corporate super fund in Australia with 180,000 members.

The company operates in 130 markets globally in the area of superannuation and employee benefits and it is owned by US-based Marsh McLennan which also operates in reinsurance and general insurance brokerage.

The purchase comes as Morgan Stanley enters the final stretch with the sale of Westpac’s broader $1bn-plus wealth management unit.

The understanding is that Colonial First State, jointly owned by CBA and Kohlberg Kravis Roberts, was the only party that lobbed a complying bid for the business.

This may indicate that other parties put forward proposals with progressive payments based on the business meeting particular performance hurdles or that there were non-cash components offered.

AMP had been in the race, but was off the pace, while Macquarie Group was also there.

The understanding is that Hub24 and Netwealth are not in the mix.

The understanding is that other groups remain in the contest should CFS fall away, but only at a lower price.

Offers had come in around $1bn, say sources, after earlier hopes to sell the unit for $1.5bn to $2bn.

Advising CFS is JPMorgan.

Westpac Panorama’s funds under management were $105bn as at March 31, up from $104.8bn six months earlier.

Group funds on Westpac’s platforms were $140.2bn as at March 31, up from $139.3bn in the previous six months.

The understanding is that much of the separation work of Westpac’s wealth management unit from the bank will need to still be completed after a sale agreement has been reached.

The asset sales are part of Westpac’s plans to divest its non-core operations and focus on its core business of banking.

Non-core operations had been shifted by Westpac into a newly created Specialised Business Unit overseen by Jason Yetton in 2020.

The wealth management operation is the last of the non-core businesses to be sold by Westpac.

Some believe that Mr Yetton may join CFS should it purchase the Westpac wealth management arm, as expected.

Mr Yetton previously worked with CFS executive chairman Rob Coombe when Mr Coombe was an executive at Westpac running its retail and business banking units in 2011.