Private equity on hunt for bargains

Sneior counsel assisting the financial services royal commission Rowena Orr QC. Picture: Supplied.

Private equity firms eager to capitalise on the fallout surrounding the royal commission into banking are believed to be circling Australian companies, and two of the firms said to be in search of opportunities are Affinity Private Equity and Lone Star.

The news comes as activity among financial services investment bankers hit fever pitch on Friday, when IOOF’s shares crashed by more than 30 per cent.

Calls were being made around the market on the back of news that chief executive Chris Kelaher, chairman George Venardos and other company executives could be forced to step down after the Australian Financial Prudential Authority took legal action to disqualify them from the industry, alleging they were not fit and proper people to run the group.

Mr Kelaher gave evidence at the banking royal commission in August, displaying contempt for APRA and defending IOOF’s decision to pay back investors in a cash management trust for its mistakes using their own money.

While private equity funds are expected to circle, dealmakers say an acquisition of IOOF would be no easy feat for a buyout fund.

Private equity would be unable to acquire more than 15 per cent of a listed financial such as IOOF without the federal treasurer’s approval, which relies on APRA’s recommendation. A turnaround of IOOF is expected to take a substantial amount of hard work and investment.

While one possibility is that IOOF is broken up and sold, the question is what parties remain the buyers of what some say is a series of legacy products that no other company wanted to buy other than IOOF.

When IOOF purchased ANZ’s pensions and investments business OnePath last year, it was thought to be the only buyer.

The only possibility could be private equity.

The funds said to be in the space looking at various financial opportunities are Affinity Private Equity and Lone Star, both based in the US.

The theory is that following the royal commission, banks will take a tougher stance on lending, opening more opportunities for other non-bank lenders.

Affinity recently bought listed finance firm Scottish Pacific for $630 million and is said to be interested in other targets.

Silver Chef and Axsesstoday are among two firms said to be on the radar of suitors.

Silver Chef provides funding for commercial restaurant and kitchen equipment, while Axsesstoday finances equipment.

Both have recently faced financial distress and at one stage a merger between the pair was mooted.

Meanwhile, AMP also remains a talking point in dealmaker circles.

The suggestion is that the management of AMP Capital is eager for a party to buy the subsidiary, but it is considered the jewel in the crown for AMP.

AMP’s bank has also been on the radar before and only was not sold because former chief executive Craig Meller and chairman Catherine Brenner were eager to retain the operation.

Some now suspect it may once again be on the block once new chief executive Francesco De Ferrari becomes more familiar with the business.