IOOF completes $1.4bn MLC deal with NAB to create wealth management giant

IOOF expects its merger with MLC will ultimately deliver enhanced service at lower costs to its members and clients.

IOOF chief executive Renato Mota. Picture: Stuart McEvoy

The massive deal to stitch together IOOF with MLC Wealth has been sealed, with National Australia Bank to relinquish control of the business from midnight Monday.

The $1.4 billion deal doubles the size of IOOF, taking the wealth management business to the largest in the country with almost 2.2 million customers.

However, NAB will retain legal ownership of MLC’s advice entities as the bank seeks to complete remediation programs of affected customers.

MLC was given a shellacking in the financial services royal commission after a litany of poor behaviour was spotlighted at the wealth manager.

NAB has already paid more than $39.94 million in remediation to 1294 bank customers for non-compliant advice.

The deal sees 406 MLC advisers join IOOF, taking in the 84 per cent who passed the target set and onboarding requirement of the business.

IOOF CEO Renato Mota said the deal to incorporate MLC would transform the wealth manager.

“While this acquisition delivers immediate value to our shareholders, we consider its potential for medium and long-term value even more compelling,” he said.

“IOOF and MLC share a common purpose to improve the financial wellbeing of all.

“Together, we will deliver clients and members broader access to wide-ranging capabilities and technical expertise, enhanced infrastructure and a strong corporate governance framework. Importantly, this step-change in scale will, over time, lower the cost of serving clients and members.”

Two new roles have been added to the merged leadership team in charge at the wealth manager, headed by Mr Mota who ushered in the deal.

Garry Mulcahy will take the role of chief asset management officer at the business, after overseeing IOOF’s return to active management in recent years.

Sawsan Howard has been appointed chief of corporate affairs and marketing officer.

The sale will see NAB net $1.24 billion up front, followed by a $200 million five-year structured subordinated note issued by IOOF. Picture: Hollie Adams

The deal with MLC is expected to deliver $65-80 million in upfront cost efficiencies of the ­almost $120 million expected by the end of financial year 2022.

The two businesses are currently hashing out internal alignment of reporting, including MLC’s corporate entities.

MLC’s funds under management and administration will be reported in IOOF’s fourth quarter business update due July 29.

The sale will see NAB net $1.24 billion up front, followed by a $200 million five-year structured subordinated note issued by IOOF, which expects a $360 million one-off pre-tax integration and transaction cost associated with the deal to the end of the financial year 2024.

NAB CEO Ross McEwan said the sale of MLC allowed the business to continue simplifying its assets and portfolio.