Netwealth may revisit Praemium takeover as share prices slump

Netwealth is a retail platform that hosts superannuation data, allowing customers to buy and sell shares and manage funds.

Market volatility may create the opportunity Netwealth needs to return to the negotiating table with its earlier takeover target Praemium.

Netwealth shares have fallen about 20 per cent on the back of the market volatility in recent days, while Praemium is down about 43 per cent so now a scrip merger may make better sense.

Netwealth made a $785m scrip proposal to merge with Praemium around November last year but Praemium rejected its offer.

Praemium offers services for institutional and wealthy investors across super and other areas and it counts groups like Morgan Stanley among its customers that use it for tax reporting and vertical equities.

Netwealth is a retail platform that hosts superannuation data, allowing customers to buy and sell shares and manage funds.

Netwealth has been seen as one of the strongest performers in the sector and is keen to move up the vertical stack and analysts believe consolidation in the industry makes sense.

Last year, it had Goldman Sachs as its adviser, while Praemium had Deloitte in its corner.

Praemium lost its chief executive in 2020 and Anthony Wamsteker was appointed interim chief executive in August last year which many believed made it vulnerable for a buyout.

Despite trading below its peers, it has been delivering reasonable results.

Last year, Netwealth made its bid by way of scrip where it was offering Praemium shareholders one Netwealth share for every 11.96 Praemium shares, with the offer equating to $1.50 per share on October 27 when Praemium’s shares were at $1.17 and Netwealth’s were at $17.55. This was a 29 per cent premium to the previously traded price.

Praemium’s justification for rejecting the offer was that it was only a 17.6 per cent premium based on the closing price on November 1.

Netwealth’s shares closed on Wednesday at $11.21 and Praemium at 46.5c.

Netwealth argues that a merger between the two groups is a positive because it creates the largest independent wealth management platform in Australia.

For the 12 months to September, it had about $16bn in net flows.

The combined group would account for about $72bn of funds under management and more than $22bn of non-custodial assets.

One of Praemium’s key customers, Escala Partners, is understood to prefer Netwealth as an owner over other groups that may pursue the business such as Hub24. Escala was the largest customer of Powerwrap, which Praemium purchased about two years ago.

Suggestions were last year that Netwealth needed to offer a premium of about 45 per cent to be given the backing by Praemium’s board.