Under the terms of the proposed transaction, SFGA shareholders will be offered 0.104 of an IOOF share for each SFGA share they hold.
The proposed transaction has a total value of $670 million.
IOOF is also making available a cash alternative, subject to a maximum cash component of $100 million in aggregate.
The cash equivalent will be calculated based on the volume weighted average price (VWAP) of IOOF shares over the 10 trading days immediately before the Scheme Meeting.
The offer represents an implied valuation multiple of 18.5×3 SFGA’s underlying net profit after tax for the 12 months ended December 2013, according to an IOOF statement.
IOOF intends to maintain the current SFGA brand strategy, operating model and client proposition, according to the the statement.
“SFGA’s board has unanimously recommends that SFGA shareholders vote in favour of the Scheme.
IOOF managing director Christopher Kelaher said: “This transaction is a continuation of IOOF’s ongoing, long-term strategy of pursuing value accretive acquisitions.”
“The addition of SFGA will increase IOOF’s Financial Advice and Distribution segment considerably. This segment currently accounts for 14 per cent of our revenue which will rise to an expected 30 per cent of revenue after the transaction,” said Mr Kelaher.
“The combination of the two businesses will strengthen IOOF’s capabilities and will enhance our high net worth proposition,” he added.
Mr Kelaher added that it would be “business as usual” for SFGA’s clients.
SFGA managing director Tony Fenning said: ““SFG Australia is fully committed to establishing a high quality, integrated and independent financial advice, wealth management and accounting services group that offers our clients an alternative to the major banks.”
“At the corporate level it has been our responsibility to find the best resources, best products and services to support our leading advisers and joint venture partners,” said Mr Fenning.
“This potential merger is another positive step in continuing our journey to be the best advice group in Australia and leveraging the scale of IOOF to continue to offer our clients the best advice together with our range of ‘best of breed’ products and services to implement their requirements,” he said.
Tony Fenning will remain with the combined group as a Senior Advisor. In addition, Tony Fenning, Jim Kilkenny and Sam Gannon, all current Board members of SFGA, have agreed to join a new Advisory Forum which will advise the SFGA businesses following the merger.
SFGA is expected to hold a shareholder meeting in early August at which SFGA shareholders will vote on the proposed transaction.
