Brookfield assesses an Insignia bid as private equity suitors prepare for a potential showdown
Global investment giant Brookfield is considering lighting the fuse on a bidding war by making an offer for Insignia, which is already assessing CC Capital Partners’ pitch, sources say.
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Global investment giant Brookfield is actively weighing a bid for ASX-listed wealth group Insignia, despite the prospect of a fierce private equity bidding contest breaking out, sources say.
It is unclear if Brookfield is using banking or legal advisers, but The Australian understands the firm is working on a potential tilt at Insignia, formerly IOOF. Sources said Brookfield was yet to decide whether to make an indicative offer.
A Brookfield spokeswoman declined to comment, as did an Insignia spokesman.
Insignia – which houses the MLC brand after it acquired the business from National Australia Bank – is mulling a fresh offer for the company pitched at $2.9bn, or $4.30 per share, by CC Capital Partners.
The New York-based private equity firm’s approach was made late on Friday, January 3 and disclosed to Insignia’s investors on Monday.
Insignia’s board has told investors to sit tight while they assess the merits of the non-binding bid, and whether to grant the suitor access to due diligence.
A formal response from the target’s board is not expected until next week.
The CC Capital tilt, which includes an option to roll into an unlisted entity, trumped a $4 per share offer by Bain Capital, which was rebuffed by Insignia’s board in December.
Brookfield, which owns Australian assets including Healthscope and a stake in Journal Student Living, has about $US1 trillion ($1.61 trillion) of assets under management around the world, spanning renewable energy and transition, infrastructure, private equity, real estate and credit.
Insignia’s investors will be hoping for a bidding tussle, but it remains to be seen whether that will occur.
“We think the company has tremendous upside and we want to make sure it gets realised,” said one Insignia investor, who asked not to be identified.
He said Insignia’s chief executive, Scott Hartley, had a “good plan” to revive the company’s fortunes.
In November, Mr Hartley outlined a plan to lift performance and slash costs after a tough for the company that included adviser and fund outflows.
Insignia’s shares closed 1.2 per cent lower at $4.04 on Thursday, on light volumes, outpacing a 0.2 per cent decline in the S&P/ASX200. The stock had surged almost 15 per cent to $4.06 on Monday when CC Capital’s offer was made public.
Morgan Stanley analyst Andrei Stadnik upgraded his Insignia rating to “equal weight” this week, reflecting buyer interest in the company and stronger underlying earnings momentum from rising markets.
“We see longer-term potential for IFL to establish a profitable footprint in a wealth landscape vacated by the banks,” he said in a note.
“But for now IFL 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 … We do not expect dividends over the next two years.”
Mr Stadnik markedly raised his share price target on the stock from $2.68 to $4.40.
One theory surrounding Brookfield’s interest in Insignia is linked to a potential combination with another asset it owns here – La Trobe Financial.
While La Trobe is a non-bank lender it also oversees fixed income credit funds for retail investors, largely in residential property-backed loans. The company’s website points to $11bn being housed in La Trobe’s Australian credit fund and it has $20bn under management.
Brookfield is understood to have looked at broadening La Trobe’s credit fund into other areas and considers a purchase of Insignia as a way of accelerating that plan.
A private equity or offshore-based acquisition of Insignia would require approvals by the prudential regulator and Foreign Investment Review Board.
Originally published as Brookfield assesses an Insignia bid as private equity suitors prepare for a potential showdown
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