Christopher Kelaher

IOOF has achieved the top ranking for the number of advisers in Barron’s survey of Australian financial advisers for the second year in a row.

IOOF aligned advisers constituted 24 per cent of Australia’s top financial advisers, as ranked by the respected U.S. financial investment publisher. On the second annual list of ‘Australia’s Top 50 Financial Advisers’, 12 of the top 50 advisers are IOOF aligned advisers.

The survey recognises leaders in the financial services sector and was published in The Australian’s The Deal magazine. IOOF advice groups represented in the survey are Shadforth Financial Group and Bridges Financial Services. Applicants were required to answer more than 70 questions about their practice, on topics such as financial performance, education, credentials, and commitment to charitable and philanthropic work.

IOOF’s Managing Director, Christopher Kelaher said, “We believe in the value and importance of financial advice for all Australians. I am extremely proud that our continued focus on quality financial advice has been recognised by this survey. Our advice-led strategy and putting our clients at the centre of all we do has led to this fantastic achievement.

“IOOF’s open architecture approach is a stand-out in the industry and clearly differentiates us from our peers. Ensuring our advisers have access to a wide range of both IOOF and other industry leading products and services underpins our advice-led strategy. We continue to attract and retain the most talented, dedicated and expert advisers in the industry.

“With our IOOF Advice Academy, ClientFirst approach and unique open architecture, we are confident we will continue to be Australia’s leading specialist wealth manager.”

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Christopher Kelaher

IOOF Holdings Limited (ASX: IFL; OTC: IOOFY) yesterday announced that it has entered into an agreement with Australia and New Zealand Banking Group Limited (“ANZ”) to acquire ANZ’s OnePath Pensions and Investments business and Aligned Dealer Groups for a cash consideration of A$975m, subject to a completion adjustment.

Transaction highlights

• IOOF Holdings Ltd (“IOOF”) has agreed to acquire ANZ’s OnePath Pensions and Investments business and four Aligned Dealer Groups: RI Advice, Millennium 3, Financial Services Partners and Elders Financial Planning (collectively “ANZ Wealth Management”)
• Highly complementary business – IOOF will become the 2nd largest advice business by adviser numbers and further strengthen its position as 2nd largest advice business by Funds Under Advice (“FUAdvice”), and become the 5th largest platform provider in Australia by Funds Under Administration (“FUAdmin”)
• IOOF will enter into a 20 year Strategic Alliance Agreement with ANZ to distribute IOOF wealth products through ANZ’s Australian banking network
• Substantially increases scale – FUAdvice up 34%, financial adviser numbers up 71% and FUAdmin up 125%
• Pre-tax cost synergies expected to be approximately A$65m per annum from FY2021, with further potential for enhanced revenue
• Attractive valuation based on earnings which already reflect significant legacy closed product rationalisation;
• Price to earnings of 15.5x based on FY2017A UNPAT (9.0x including anticipated run rate cost synergies); and
• EBIT multiple of 9.8x based on FY2017A EBIT (5.5x including anticipated run rate cost synergies)
• Anticipated mid-single digit EPS accretion in FY2019, expected to increase to ~15% in the first full year and over ~20% thereafter
• The transaction will be funded through a ~A$450m fully underwritten institutional placement, a share purchase plan and new debt facilities
• The transaction is expected to complete in around 12 months, however every endeavour will be made to complete earlier

Highly complementary businesses

IOOF Managing Director, Christopher Kelaher commented, “This acquisition cements IOOF’s position as Australia’s leading advice-led wealth manager. ANZ Wealth Management has a natural fit with IOOF’s current business model. It presents a unique opportunity for IOOF to significantly increase scale, create value from cost synergies, and partner with an iconic Australian institution.”

Strategic Alliance Agreement to expand distribution footprint

IOOF has also entered into a 20 year Strategic Alliance Agreement with ANZ to provide wealth management solutions to their customers. This agreement provides access to ~5.6m retail banking and approximately ~0.5m corporate, business and SME customers via ANZ channels including ~286 ANZ Financial Planning advisers (in ANZ branches and over the phone) and digital channels. ANZ Smart Choice super products are integrated into ANZ’s internet banking platform which has approximately ~3m digital users daily.

Mr Kelaher commented, “We are delighted to be establishing a 20 year partnership with ANZ to deliver quality wealth management solutions to their customers. Partnering with one of Australia’s leading banks will provide IOOF with access to a significant number of customers through complementary distribution channels further strengthening and diversifying our core wealth management business.”

Increased scale to deliver significant benefits

The transaction strengthens IOOF’s position as the 2nd largest advice business in Australia by FUAdvice and positions IOOF as the 2nd largest advice business in Australia by adviser numbers and 5th largest platform provider in Australia by FUAdmin. This increase in scale provides opportunity to eliminate duplicate back office functions and realise scale benefits. IOOF has estimated run rate pre-tax cost synergies from the proposed acquisition to be A$65m per annum from FY2021, which is approximately 11% of the combined cost base of IOOF and ANZ Wealth Management.  Mr Kelaher noted, “As a specialist advice-led wealth manager, IOOF is highly experienced in the management of advisory networks with a unique advice led proposition offering open architecture and additional services such as our IOOF Advice Academy. We look forward to expanding these capabilities across ANZ’s Aligned Dealer Groups.” “We have a proven track record in realising significant synergies from acquisitions. Importantly, the alignment of ANZ products and IOOF products provides substantial opportunity for improved pricing and product features for our advisers and clients.” “ANZ has been proactive in transitioning its platform products away from higher fee legacy products towards digital distribution. This means that earnings have already reset and the business is now efficiently positioned for future growth.” IOOF estimates that it will incur separation costs of approximately A$130m over three years to integrate ANZ Wealth Management.

Purchase funding

The transaction will be funded through a combination of fully underwritten equity placement, a share purchase plan and debt;

• a fully underwritten ~A$450m institutional placement, launched today;
• Share Purchase Plan to raise up to ~A$100m (subject to discretion of IOOF Board); and
• the balance funded through new debt facilities The funding structure utilises IOOF’s strong balance sheet and applies modest additional leverage.

Outlook

Mr. Kelaher said, “Our commitment to consistent execution of our advice-led strategy via both acquisitive and organic growth is unwavering. This transaction continues our strong track record of pursuing value accretive acquisitions.”  “I am extremely confident that this transaction will deliver superior outcomes for our clients, advisers and shareholders.”

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On 14 June 2017, IOOF entered into an agreement with National Australia Bank (NAB) to purchase NATL, including the NATL Personal Trustee business and select trustee arrangements in the NATL Corporate Trustee business.

A strong strategic fit

IOOF Managing Director, Christopher Kelaher, commented, “We are excited by the benefits the acquisition will deliver to the advisers and clients of both AET and NATL.
“NATL is a strong strategic fit for AET, with AET now becoming one of the largest providers of compensation trust services in Australia.

“AET’s enhanced scale and national presence provides NATL clients with access to a broader range of specialist estate and trustee services.

“The acquisition further reinforces IOOF’s commitment to providing advisers and their clients with professional estate and trustee services as part of our holistic approach to wealth management planning.”

Seamless transition and focus on service excellence

Mr Kelaher added, “IOOF and AET are committed to client service excellence and have worked closely with NAB to ensure a seamless transition for clients.” NATL customers will be contacted and advised of the change in ownership.

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