Westpac to start next round of platform sale, as some bids lobbed as low as $1.2bn

The banking major prepares to start next round of platform business sale even as some offers – of as low as $1.2bn – underwhelmed the bank.

Westpac’s board discussed the indicative bids at a meeting last week. Picture: Christian Gilles/NCA NewsWire

Non-binding bids for Westpac’s investment platform division have come in as low as $1.2bn, below the bank’s expectations for offers of $1.5bn-plus as it rounds out its sweeping asset divestment process, sources said.

Parties including private equity giant KKR and partner Commonwealth Bank, which own wealth player Colonial First State, lodged indicative bids last month. Macquarie Group, AMP and HUB24 were also among as many as 15 parties that separately lodged first-round offers, before the field was set to be narrowed.

Due diligence is slated to begin next week with final binding bids due in July for the Westpac division, several parties with knowledge of the matter said. A handful of potential suitors will be notified within days whether they are through to the auction’s next round.

Sources said Westpac’s board discussed the indicative platform unit bids at a regular meeting last week. There were a range of offers with $1.2bn said to be the bottom end of the range while some came in higher, but still below the bank’s targeted expectations.

A Westpac spokesman declined on Thursday to comment on the sale process.

On Monday when handing down the bank’s interim earnings, chief executive Peter King noted the portfolio simplification was making Westpac simpler.

“The next big step is exiting super and platforms and we are well progressed,” he said.

After a turbulent period including paying a record $1.3bn penalty to Austrac, Westpac has sold a string of business units as part of its simplification plan including life insurance, financial planning and general insurance.

Funds under administration on Westpac’s flagship Panorama platform were $105bn as at March 31, up from $104.8bn six months earlier. Group funds on Westpac’s platforms amounted to $140.2bn as at March 31, up from $139.3bn on September 30 and $128.2bn a year earlier, the bank’s earnings report showed this week.

A platform holds investments such as managed funds and shares in one place and is used by financial advisers and individuals for centralised reporting. Back-office services and tax reporting are also often provided.

AMP – which is taking advice from UBS – declined to comment on its interest in Westpac’s platforms, but CEO Alexis George last month said the firm wanted to stay abreast of acquisition opportunities in the market.

“We will continue to look at what‘s going out there in the environment. But if we were to do anything, any acquisitions, I would come back to shareholders or look at other (funding) sources, I just want to be really clear,” she said at the time. Ms George was referring to not using proceeds from the sales of AMP’s private markets division through two deals to fund new purchases.

Assets under management on AMP’s flagship North platform rose by $9.8bn to $61.4bn in 2021, while its master trust had assets under management of $62.9bn.

Strategic players such as Colonial, Macquarie and AMP are viewed as the best placed to buy the Westpac platforms unit, as they can extract more synergies from the purchase over a private equity suitor. Buyout firms were in and around the auction process, but it is unclear if any will progress to the next round of bidding.

The Australian in April revealed Westpac had received indicative bids for its investment platforms business.

Potential acquirers of the business will want to immerse themselves in more detailed information during the due diligence phase, but there is a risk some may be deterred by Westpac’s legacy systems and remediation issues. That and the complex process of separating the division from the bank may also weigh on the amounts suitors will put forward as final binding offers.

Macquarie’s annual earnings results this month showed it had $10.7bn in surplus capital, as it prepares for changes to capital standards and also positions for potential acquisitions and to fund organic growth. Funds on the group’s platform stood at $118.6bn as at March 31, up 17 per cent on a year earlier.

A Macquarie spokeswoman declined to comment on interest in Westpac’s platforms.

A HUB24 spokeswoman said the company is “approached regularly regarding market opportunities”, and takes its ASX disclosure obligations seriously. She declined to comment on the Westpac speculation.

Insignia Financial – formerly IOOF – steered clear of the Westpac platforms process after snapping up National Australia Bank’s wealth business in a deal that completed last year.