Bain Capital sweetens Insignia Financial bid

The investment firm has lobbed a sweetened $4.30 per share offer for Insignia Financial, matching the bid from rival CC Capital but with an added incentive.

Insignia Financial CEO Scott Hartley. The wealth manager has received two takeover bids in recent weeks. Picture: Arsineh Houspian.

Bain Capital has kicked off the first bidding war of the year, lobbing a sweetened bid for Insignia Financial and offering a possible scrip component to keep shareholders on side and give it an edge over rival CC Capital.

After its initial advances were rejected in December, Bain has returned to ASX-listed Insignia with a $4.30 per share offer that values the wealth manager at $2.9bn, matching that made by peer CC Capital earlier this month.

But the suitor’s failure to come in above CC Capital signals it may be at, or close to, its ceiling on the deal, sources said.

The revised offer represents a 7.5 per cent premium to Bain’s original bid and comes days after peer CC Capital put in its own $4.30 per share offer.

The latest bid is a 40 per cent premium on Insignia’s early December share price and 85 per cent higher than the stock was trading at in September. Insignia’s share price hit a more than three-year high on Monday, reaching $4.25 in intraday trade before closing at $4.22, up 10c for the day and the highest point since October 2021.

Alongside its cash offer, Bain added another sweetener, saying it was open to discussing a structure that would give Insignia shareholders the opportunity to receive a portion of their consideration as scrip.

Insignia on Monday said its board and financial and legal advisers were considering the revised proposal in parallel with the CC Capital offer.

“There is no certainty that either proposal will result in a binding offer or that any transaction will eventuate,” the wealth manager cautioned.

With Insignia at the start of a five-year transformation plan, the scrip option is likely to appeal to at least some shareholders. Tribeca Investment Partners portfolio manager Jun Bei Liu, who runs Tribeca’s $1.5bn Alpha Plus Fund, said Bain’s move to add a flexibility component made its offer superior to CC Capital’s. The Alpha Plus Fund has a shareholding in Insignia.

“At $4.30, that’s a good price for now. But Insignia obviously has big (transformation) plans, including cost-outs and the like. If they can achieve any of that, then potentially the future (payoff) is actually quite large. So Bain offering a sweetener in terms of shareholders potentially holding on to some scrip is a good move,” Ms Liu told The Australian.

Other Insignia shareholders include former Credit Suisse banker John Wylie’s Tanarra Capital, which has a 15.2 per cent stake, and Tasmanian millionaire Bruce Neill with 4.01 per cent. Super funds Australian Retirement Trust and Hostplus are also major shareholders.

In the wake of Bain’s initial $4-a-share bid for Insignia in December, Tanarra branded the suitor’s offer “highly opportunistic”, saying Insignia boss Scott Hartley should “remain focused on the business improvement plan they are in the early stages of delivering”.

Morningstar analyst Shaun Ler said the latest offer was a good price and that shareholders concerned about the execution risk of Insignia’s transformation plans would be keen to take the cash and walk away. “At $4.30 a share, that’s is about 20 per cent above the pre-announcement price. So it’s decent, but there’s always room for it to be more attractive,” Mr Ler said.

Following CC Capital’s bid on January 3, Morningstar lifted its fair value estimate for Insignia from $3.60 to $3.95. In a note to clients, Mr Ler said the proposal vindicated his view that Insignia was undervalued.

“The firm is recovering from past headwinds that hurt its ability to attract and retain client assets and improve profitability ... Margin expansion prospects are improving, driven by restructuring initiatives such as migrating client funds to more efficient platforms, reducing non-essential costs and an expected recovery in fund flows.”

Morgan Stanley last week also raised its price target for Insignia to $4.40 on the longer-term potential for the firm to establish a profitable footprint in the wealth sector. “But for now Insignia is in outflows, revenue margins are falling and the prolonged costly complexity of integrating two bank wealth businesses is causing a big disconnect between reported and underlying earnings,” the analysts, led by Richard E. Wiles, told clients after CC Capital’s bid came through.

“Insignia is also lagging domestic peers on retirement income product development. We do not expect dividends over the next two years (fiscal 2025 and 2026) given cash constraints from accelerated below the line spending and potential repayment of sub-debt,” they cautioned.

Morgan Stanley is tipping 4-6 per cent underlying earnings growth for the wealth manager in fiscal 2026 and 2027.

The battle for Insignia is the first major takeover play in Australian markets this year and comes as the Australian dollar sits around US61c, well below its long-term average against the US dollar.

CC Capital’s push for Insignia comes more than three years after it bid for wealth manager MLC in 2020. MLC is now a subsidiary of Insignia, which plans to relaunch the MLC brand this year as part of its five-year strategy.

Insignia has engaged Citigroup and Gresham Advisory Partners as its financial advisers and King & Wood Mallesons as its legal adviser.

As previously reported by The Australian, global investment giant Brookfield is understood to be actively weighing a bid for the wealth powerhouse. Insignia on Friday said it had not received any offer from Brookfield.

Originally published as Bain Capital sweetens Insignia Financial bid