Commonwealth Bank selling Colonial First State Global Asset Management to Japan’s Mitsubishi UFJ for $4.13bn

The float of CBA’s Colonial First State global asset management arm has been trumped by a $4.13bn sale to Japan’s MUTB.

Picture: AAP.

Commonwealth Bank is selling its Colonial First State global asset management group to Japan’s Mitsubishi UFJ Trust and Banking Corporation for $4.13 billion, offloading the unit instead of including it in a broader demerger of its financial planning and mortgage broking units.

CFSGAM has approximately $213 billion in assets under management, making it Australia’s largest asset manager by some margin.

Commonwealth Bank confirmed the sale of the group, known internally as “CFSGAM”, and outside Australia as First State Investments, on Wednesday morning after reports of the deal surfaced on Japan’s Nikkei news service.

CBA had previously planned an ASX listing of the CFSGAM business, in a float that was expected to be worth approximately $5bn.

The float, which was originally to have been scheduled for some time during 2018, was set to have been one of the ASX’s largest listing for years.

By mid-morning, CBA shares were up slightly on the news, trading at around $68.55.

CBA said in a statement that the Japanese group approached it about a sale following the announcement of plans to demerge its wealth management and mortgage broking businesses in June.

The deal meant that CFSGAM will not be included in the broader demerger, CBA said.

“Today’s announcement represents another important milestone in CBA’s strategy to focus on its core banking businesses,” Commonwealth Bank CEO Matt Comyn said in a statement.

“The sale of CFSGAM to MUTB represents significant value for CBA shareholders and is a positive outcome for CFSGAM clients and employees,” he said.

“We look forward to welcoming the full CFSGAM team to our group,” MUFJ Trust and Banking president and CEO Mikio Ikegaya said.

MUTB is one of the largest foreign lenders in Australia and is said to funding the acquisition from existing capital.

The price for CFSGAM represented a multiple of 17.5 times CFSGAM’s pro-forma 2018 full-year net profit after tax of $236 million, CBA said.

“The estimated total proceeds imply a post-tax gain on sale of approximately $1.5 billion, which includes estimated post-tax separation and transaction costs of approximately $100 million,” a statement from the bank said.

The sale will deliver CBA an increase of $2.9 billion to its common equity tier one capital, or an uplift of 60 basis points

UBS and JPMorgan advised CBA on the deal, while MUTB was advsied by Morgan Stanley, sources told The Australian.

The deal remains subject to regulatory approvals in a raft of countries in which CFSGAM operates, including Australia, Japan, Hong Kong, Singapore, Britain and the US.

Sources said it was unclear what the sale of CFSGAM meant for other business units that were earmarked to feed into the new demerged entity, and some investors had - due to the diverse nature of the units - questioned the logic of CBA demerging its asset management, mortgage broking and planning businesses into one group.

However CBA announced that CEO of Westpac’s Society One, Jason Yetton, would be joining it to lead the demerger of that “NewCo” business, which includes Colonial First State, Count Financial, Financial Wisdom, Aussie Home Loans and CBA’s holdings in CountPlus and Mortgage Choice. CBA wealth management CFO Andrew Morgan will become CFO for the new group.

CBA said that the announcement of the CFSGAM sale meant that candidate non-executive directors flagged for NewCo would no longer take up the positions.

The CFSGAM deal will bring MUFG Trust closer to its goal of having $US 1 trillion in assets under management, the Nikkei report said. The Japanese bank has approximately Y1 trillion set aside for acquisitions to help achieve that aim, it says.