Listed portfolio administration specialist Praemium has entered into an agreement with BlackRock Investment Management to take over its separately managed account (SMA) business.
The transaction, which is subject to investor approval representing 50 per cent of scheme funds, was expected to be completed by the end of the year, the company said in a statement to the Australian Securities Exchange.
The agreement requires Praemium to fund an estimated $500,000 of expenses, including regulator approvals, legal expenses, IT costs, marketing and rebranding, and certain investor vote-related expenses associated with the change.
Under the terms of the agreement, Praemium will also take on BlackRock’s existing operations team.
The agreement follows BlackRock’s review of its SMA business in June.
“BlackRock intends to retire as responsible entity of the BlackRock SMA, in line with its decision to focus on the delivery of world-class asset management and risk management solutions to clients,” a BlackRock spokesperson told InvestorDaily.
“The technology and administrative features of the SMA business are well suited to Praemium, which has expertise in the delivery of cost-effective investment administration and portfolio management services.
“Consistent with Corporations Act requirements, a meeting of BlackRock SMA investors will be called to vote on the retirement of BlackRock and the appointment of Praemium Australia as responsible entity of the BlackRock SMA.”
In addition to the company’s agreement with BlackRock, Praemium has also acquired Hong Kong-based IT company WealthCraft Systems and has plans for an equity raising.
Praemium yesterday announced it had purchased WealthCraft Systems for $625,000 cash plus the issue of 2 million fully paid ordinary shares in Praemium.
The company expected to complete the transaction by October 2012, it said.
It also confirmed arrangements to raise $4.46 million in new equity capital.
Total outlays amount to about $1.1 million, of which $400,000 has already been advanced to WealthCraft as a secured loan.
While Praemium holds cash resources of around $4.3 million, sufficient to fund the acquisition outlays, company expansion plans require a stronger balance sheet.
“The raising of approximately $4.46 million in new equity will build the company’s cash resources after acquisition outlays and underwriting expenses to approximately $8 million,” Praemium said.
The company plans to raise the funds through institutional share placement and a fully underwritten non-renounceable rights issue.
“We have confidence that the BlackRock SMA, currently at $600-million funds under management, will rapidly grow to over $1 billion, at which time it will trigger a maximum prudential capital requirement of $5 million,” it said.
