IOOF eyes March completion for MLC; remains confident of cost savings

IOOF says deal could be done as early as March 2021; refuses to rule out offloading MLC’s asset management businesses.

IOOF CEO Renato Mota in Melbourne. Picture: Stuart McEvoy/The Australian.

IOOF is preparing to complete its controversial acquisition of NAB’s wealth business as early as March next year and says it is confident it can deliver on the more than $200m it is expecting in annual savings from the integration of MLC and the ANZ Pensions and Investments business.

The wealth manager also refused to confirm whether it would hold on to MLC’s asset management businesses once the $1.44bn deal was completed, with chief executive Renato Mota saying “nothing has been ruled in or out”.

Once the MLC deal is completed (probably between April and June next year but potentially as early as March), IOOF will ­acquire MLC’s asset management capabilities. During IOOF’s investor day on Tuesday, Mr Mota said no decision had been made on the future of those businesses.

“We’ve had a variety of different exposures to that space in the past, including Perennial (which was sold),” he said. “We’ve limited our exposure [in the past] but we continue to deepen our knowledge of the boutiques, of the broader footprint, so we’re not ruling anything out at the ­moment.

“We’ll make an appropriate ­assessment over the coming months before completion.”

IOOF at the end of August announced it would buy NAB’s MLC wealth division for $1.44bn, a move that angered a cohort of the wealth manager’s shareholders, who say IOOF overpaid for the wealth business and will struggle to deliver on its predicted synergies.

At the annual meeting, the wealth manager was accused of “butchering” the share price with the deal, which one shareholder labelled a “disgrace”.

Before the MLC announcement, IOOF shares were trading at $4.26. They went into a tailspin once the deal was made public in late August, shaving 20 per cent off their value. The shares have drifted since, but jumped 3 per cent on Tuesday to $3.23 after the strategic update.

Following its acquisition of MLC, IOOF will have the largest footprint of advisers in the country and will be the nation’s ­second-largest superannuation entity.

“Through that scale we can ­reduce the costs to serve and benefit clients and shareholders,” chief transformation officer Chris Weldon said.

“We have done a large program of work to ensure we can complete the MLC acquisition as fast as possible and integrate the three businesses. We have resourced up with an additional 40 new roles.”

On its retention efforts ahead of the completion of the deal, Mr Weldon said he was confident IOOF could retain the vast ­majority of MLC advisers.

The integration of ANZ’s pensions and investment business, which IOOF acquired at the start of the year, was going to plan and 75 per cent of staff would have transferred over to IOOF by the end of the year, he said.

“We are also on track to deliver cumulative annual synergies of $43m by the end of 2021 from ANZ Pensions and Investments, so we are on track with synergy realisation,” he said.

Mr Mota added that the wealth manager was positioning itself to capture more of the market and was committed to reducing the cost of advice and making it more accessible. IOOF had been investing in proprietary technology to capture more of this under-served market, he said.

“We see tremendous opportunity, as an advice-led organisation, to capitalise on the changing world around us. And that’s a world that we’re seeing increased per-capita wealth, an ageing population with increasing complexity of increasing needs. And that’s certainly not going away anytime soon,” Mr Mota said. “At the same time, in the context of the MLC transaction, we are seeing structural industry disruption, which provides a tremendous opportunity for IOOF.”

After spending two years stabilising the business, IOOF was now in a transformation and deliberate growth phase, he said.

Alongside the integration of MLC and P&I, IOOF’s focus would be on making advice more accessible, ensuring its advice segment was economically viable, and transitioning to a single platform, chief advice officer Darren Whereat told shareholders.

Technology would play a key role in augmenting the advice delivered to clients, he said.

“Since the royal commission, there has been an increase in the time it takes to document advice … we are looking to automate many of those processes,” he said.