HUB24 raising $60m with eye to buying Xplore Wealth

Wealth platform HUB24 will raise $60m to fund a buying spree that includes the acquisition of a rival.

Hub24 managing director Andrew Alcock. Picture: Supplied

Wealth platform HUB24 is raising $60m to fund a buying spree that includes the acquisition of rival platform provider Xplore Wealth.

Alongside the $60m it is paying for Xplore, which it is funding with a combination of cash and scrip, HUB24 will also buy Ord Minnett’s PARS portfolio service and take a 40 per cent stake in financial services firm Easton.

All up, the three transactions would deliver a 47 per cent lift in its custodial funds under administration and 400 new adviser relationships, said HUB24 chief executive and managing director Andrew Alcock.

It would also lift its non-custody administration funds under administration to $14bn, he said.

For a total consideration of $93m, including integration and transaction costs, the transactions are expected to deliver a 13 per cent lift in earnings per share to shareholders in fiscal 2022.

“We’re excited about the opportunity in the landscape and in the market for us. We’ve been working on it for some time … it’s about timing, it’s about opportunity and it’s about taking advantage of all of it,” Mr Alcock said.

HUB24 may seek out further bolt-on acquisitions “if it makes sense” for the business.

“We’ve done three transactions at once here, which we recognise is ambitious but we’re very comfortable with what we’re doing. If something makes sense for us, we’ll certainly look at it. Right now we’re focused on running our business and working on these opportunities. But we also have an eye on the future.”

The scheme implementation agreement with Xplore will see HUB24 acquire 100 per cent of its shares for an effective price of 20c per Xplore share, a premium of 203 per cent to its last trading price.

A mix and match facility will be established that will allow each Xplore shareholder to elect to receive either 20c cash for each share, 0.00927 HUB24 shares, or 10c in cash and 0.00463 HUB24 shares for each Xplore share.

The mix and match facility is subject to a scale-back mechanism, with the cash consideration subject to a minimum of 50 per cent and a maximum of 60 per cent of the $60m.

The takeover requires Xplore shareholder approval and the approval of the Federal Court.

The platform provider will also pay $10.5m for Ord Minnett’s PARS non-custody portfolio service in a move HUB24 said would position it as one of the leading non-custody platform service providers in the country.

Its stake in Easton will come from it divesting its subsidiary Paragem, for which it will receive $4m worth of Easton shares, and from subscribing for a $14m placement. For these it will receive 15 million shares in Easton at an issue price of $1.20 per share, representing a 38 per cent premium to its last closing price.

Easton will use the proceeds of the subscription to undertake a share buyback, subject to shareholder approval.

Following these transactions, HUB24 will have up to a 40 per cent stake in the company, depending on the level of take up of the buyback.

In addition to the raising, ANZ will provide HUB24 with a three-year $12.5m debt facility to partly fund the transactions.

Underlying pre-tax earnings are expected to benefit from the transactions through increased scale and expected synergy benefits, with $10m of expected synergies per annum from fiscal 2024, HUB24 said.