Yesterday, ANZ announced it was offloaded two of the key businesses within its OnePath wealth division, with the pensions and investments subsidiary and the various aligned financial advice dealer groups sold to IOOF for $975 million.
The deal, which will see a 20-year “strategic alliance” between the two listed institutions, will see IOOF become the second largest financial advice business in Australia by adviser numbers, growing its ranks by 71 per cent and becoming larger than Westpac’s BT Financial Group and the Commonwealth Bank’s licensing network.
A statement issued by IOOF said that the transaction reflected an “attractive valuation based on earnings which already reflect legacy closed product rationalisation”.
However, speaking to InvestorDaily, market analyst Steve Prendeville of Forte Asset Solutions said the financials of the deal may not be quite so rosy from the purchaser’s perspective.
“It’s highly priced,” Mr Prendeville said.
“We’re looking at a 33.6 times profit level. IOOF is trading at around 29, so it’s unusual for businesses to pay above their own [price to earnings ratio]. However, IOOF has done that previously with [the acquisition of Shadforth Financial Group].”
The M&A consultant said that the pending sale of ANZ’s wealth business has meant the bank has not invested heavily in its dealer group businesses from a technological point of view, explaining there is work to be done for the new owner.
“There’s likely to be not only the purchase price but also future investment required as well,” he said. “There needs to be an increase in the value proposition and the pricing.”
IOOF anticipates that the transaction will be completed within 12 months, arguing that the deal makes the company “Australia’s leading advice-led wealth manager”.