Australian fund manager IOOF Holdings Ltd. agreed to buy SFG Australia Ltd. for A$670 million ($627 million), as it seeks to increase its share of the world’s fourth-largest pension market.
IOOF will offer 0.104 of its shares for each SFG share, the companies said in a joint statement today. The deal values Sydney-based SFG’s stock at 90 Australian cents per share, based on the acquirer’s 90-day volume weighted average price, a 23 percent premium to yesterday’s closing price.
The transaction, when completed, will be the second-largest acquisition in Australian-dollar terms for Melbourne-based IOOF, according to Bloomberg Data, and will turn it into the third-largest advice business by funds under advice in the country, IOOF said. The deal will more than double IOOF’s revenue from advice and distribution to 30 percent of all income, it said.
“SFG is a good bolt-on for IOOF, bringing with it advisers and affluent clients,” said Evan Lucas, a Melbourne-based market strategist at IG Ltd. “The acquisition will diversify IOOF’s revenue. The only challenge is smooth integration. Absorbing an advice and brokerage network has not always been harmonious for a wealth manager.”
SFG shares jumped 20 percent to 87.5 Australian cents at 11:48 a.m. in Sydney and were on course for their highest close since February 2007. IOOF shares were 2.1 percent higher at A$8.30. The benchmark S&P/ASX200 index was 0.5 percent lower.
IOOF expects the transaction to add 8.3 percent to earnings per share in the financial year ending June 2016 and to generate pretax savings of about A$20 million by then, it said in the statement.
The transaction is expected to be completed in August subject to all approvals. IOOF has A$123.9 billion of funds under management, advice and supervision and more than 600,000 customers, according to the statement. SFG has A$13.7 billion in funds under advice, A$9.9 billion in funds under administration, A$1 billion in managed portfolios and A$5.9 billion in funds under management, according to the statement.
IOOF is advised by Nomura Holdings Inc. and King & Wood Mallesons while SFG is advised by Bank of America Corp.’s Merrill Lynch unit and Clayton Utz, the firms said in the statement.