Insignia chief executive Scott Hartley critical for CC Capital’s tilt for Insignia Financial tilt

Investors are now watching to see whether Bain Capital re-enters the bidding fray, after CC Capital lifted its offer the wealth company that owns MLC.

Besides lobbing a sweetened offer for Insignia Financial, suitor CC Capital has another edge in the bidding tussle for the wealth company that owns MLC.

Insignia chief executive Scott Hartley was working under the radar with the New York-based private equity firm in 2020, when it was bidding for National Australia Bank’s MLC.

Insignia - then called IOOF - won that auction snapping up MLC for $1.4bn.

What those revelations mean, though, is that CC Capital and its executives know Hartley intimately, and it suggests they are likely backing his Insignia turnaround plan, albeit they may later seek out other acquisitions to combine it with.

It puts Hartley in an interesting predicament, although enough time has passed to almost ensure he is at arm’s length to CC Capital and its bid.

This column understands the Insignia board has considered the issue of a potential conflict and is comfortable with Hartley’s participation in current bid deliberations.

Although there are no strict guidelines around the situation facing Hartley, Insignia’s board may have looked at the Australian Institute of Company Directors’ definition of an independent director which outlines following a period of three years apart, a person is no longer deemed affiliated to an entity.

Thursday 29th February 2024. Insignia Financial CEO Scott Hartley. Photograph by Arsineh Houspian.

Interestingly, CC Capital’s website says: “We leverage our deep industry relationships to partner with exceptional management teams and board members to drive operational improvements in our portfolio companies.”

Insignia’s investors are now watching to see whether Bain Capital re-enters the bidding fray, after CC Capital lifted its offer to $4.60 per Insignia share valuing the target at about $3.1bn. A tilt by Brookfield can’t be ruled out, but at this stage seems increasingly unlikely.

Prior to Friday’s bidding action both Bain and CC Capital had offered $4.30 per share for the target, after the former kicked off the contest with a $4 per share tilt late last year.

One Insignia shareholder, who declined to be named, on Friday said he believed the most recent offer was at, or around, a level that should pave the way for CC Capital to conduct due diligence.

“It’s a good offer. A deal will get done unless something comes out of the woodwork (in due diligence),” he added.

Insignia’s board is expected to respond to the sweetened bid in coming days and it will be interesting to gauge the response, given CC Capital may be angling for exclusivity.

As Insignia’s largest shareholder, John Wylie’s Tanarra Group will be a force to be reckoned with in any deal deliberations.

What’s clear is CC Capital has long held aspirations to own the MLC assets and with Australia a hunting ground for the firm, it has no doubt run the numbers on other financial services and investment platform assets here too.

The latest Insignia bidding action raises questions about the strategic moves of for-profit rivals AMP and Colonial First State, the latter owned by KKR & Co and Commonwealth Bank.

On getting a deal across the line, CC Capital will also have its lawyers working through the potential regulatory implications of a winning Insignia bid.

Rival KKR has already jumped through those hoops and understands the difficulties.

The prudential regulator signed off on KKR’s acquisition of the majority stake in Colonial from CBA in late 2021, after a protracted review spanning about 18 months. KKR was, however, the first private equity firm to own a large domestic superannuation player, which caused lengthy delays in receiving deal approvals.

Colonial was at the time also navigating a spate of regulatory issues and penalties stemming from the Hayne royal commission, which complicated the situation.