IOOF confirms $1.4bn MLC deal with NAB

IOOF has confirmed it has agreed to acquire NAB’s superannuation and advice business MLC Wealth for $1.44bn.

IOOF chief executive Renato Mota. Picture: Stuart McEvoy

IOOF has agreed to acquire NAB’s superannuation and advice business, MLC Wealth, for $1.44bn in a deal that will see it become the nation’s largest advice business.

The move was reported in The Australian on Sunday and IOOF’s trading halt was extended on Monday morning prior to the announcement. The shares are now expected to remain in a halt until Wednesday as it embarks on a billion dollar raising to fund the acquisition.

The deal will be funded via a $1.04bn fully underwritten institutional placement and accelerated non-renounceable entitlement offer.

The raising will be done at $3.50 per share, a 22.5 per cent discount to its dividend-adjusted last closing price of $4.515 and a 13.6 per cent discount to the dividend-adjusted theoretical ex-rights price of $4.05.

IOOF will also use $250m of incremental senior debt via an underwritten syndicated debt facility, a $200m subordinated loan note and $40m of cash to fund the purchase.

The opportunity to acquire MLC was “compelling” and a once-in-a-generation opportunity to create the leading wealth manager of the future, IOOF chief executive Renato Mota said.

“MLC is a natural fit with IOOF and presents a unique opportunity to create value from synergies for the benefit of clients, members and shareholders,” he said.

“As the financial services industry reshapes, a much bigger and better IOOF will position it at the forefront of the industry transformation. In this new era, and in response to changing societal and technological needs, the new IOOF will have the ability to offer unmatched choice and accessibility of quality financial advisory and wealth management services to all Australians.”

The acquisition will see IOOF become the largest retail wealth manager in the country, with $510bn funds under management, advice and administration and also the largest advice business by number of advisers. The combined Adviser number will sit at 1,884 when the transaction is completed.

It will also become the second largest superannuation provider, with $173bn in funds under administration.

IOOF took a de-risked approach to the acquisition, Mr Mota said.

It will acquire the Godfrey Pembroke and MLC brands but will not acquire the Meritum, Apogee or Garvan brands. NAB will retain the AFSL holders that operate MLC’s advice business while MLC self-employed advisers will transfer to IOOF AFSLs at completion.

IOOF will also not assume any conduct or remediation liabilities for MLC’s advice business that occur before the completion of the transaction.

But other MLC conduct or remediation liabilities, including for the platform business, will be retained by IOOF.

The wealth manager said it would manage this exposure through a combination of provisions, indemnities and warranties including indemnities for fines and penalties, regulatory investigations and litigation matters (including for two class actions and one ASIC proceeding).

IOOF is targeting $150m of synergies from the deal, which was flagged by The Australian’s DataRoom on August 3.

The one-for-2.09 entitlement offer is expected to raise $588m, while the placement will raise $452m.

The raising will see 297 million new shares issued, representing 85 per cent of IOOF’s existing capital.

Eligible retail shareholders will also be able to acquire additional new shares under the non-underwritten share purchase plan to minimise the dilution impact from the placement.

The raising will fund the acquisition while the offer, including funds raised from retail shareholders, will strengthening its balance sheet “to provide greater financial flexibility to continue to executive IOOF’s growth strategy in the current COVID-19 environment.

The acquisition is expected to be completed before 30 June 2021 and is subject to a number of conditions precedent including regulatory approvals from APRA and the ACCC.

The transaction’s announcement coincides with IOOF’s profit results, which saw the group post an underlying net profit after tax of $128.8m, down 35 per cent on the year prior, while statutory net profit surged 415 per cent to $146.4m as it completed the acquisition of ANZ’s P&I business early in the second half.

Commenting on the P&I integration, Mr Mota said it had gone as planned.

“There have been no surprises, it’s been exactly as we thought it would be,” he said.

Revenue jumped 10 per cent in the year to $1.17bn.

Funds under management grew 46 per cent to $202bn.

IOOF will pay a fully franked final dividend of 11.5c per share.