copyright linkAustralia's IOOF is making an ambitious bid to buy...

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Australia's IOOF is making an ambitious bid to buy National Australia Bank's superannuation and wealth management arm, MLC Wealth.

Street Talk can reveal IOOF is running detailed due diligence on MLC Wealth, as part of an auction set up by NAB and also involving a handful of rival bidders.

IOOF chief executive Renato Mota has a team assessing MLC Wealth. Tash Sorensen

IOOF is understood to be working with the intention of putting a detailed and binding offer to NAB in coming weeks.

Sources said there were three reasons why IOOF believed it could outbid rival bidders, which include private equity firms JC Flowers and CC Capital, and make the acquisition work for the company and its shareholders.

First, it reckons it could achieve $200 million in synergies a year by combining MLC Wealth with its existing business, which would not be available to the potential private equity buyers.

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$4.630.

Second, there are a bunch of senior IOOF executives with detailed working knowledge of MLC Wealth including chief operating officer Frank Lombardo, who formerly worked at MLC Wealth and its owner NAB.

Finally, as an existing industry player, IOOF is well known to Australia's financial services regulators and may have a better chance of completing a deal quickly than an incoming private equity firm like JC Flowers or CC Capital, which have no operations or track record in Australia.

An IOOF spokeswoman declined to comment on Wednesday. The company is due to report FY20 results on Monday, August 31.

Double down in wealth

MLC Wealth would be a big bite for IOOF, which has a $1.62 billion market capitalisation and had $202.3 billion in funds under management, advice and administration at June 30.

MLC Wealth averaged $120 billion in funds under administration and $154 billion under management in the six months to March 31, and reported $384 million revenue and a $42 million cash profit in the half-year.

IOOF's interest comes as it works to integrate what was ANZ's Wealth Pension and Investments business, which it acquired for $825 million late last year after a protracted settlement. While it is early days, IOOF is understood to be pleased with the integration and reiterated its expectations of $68 million a year in synergies only last month.

IOOF is understood to have tapped advisers to help at MLC Wealth, including diligence and considering its funding options. The financial services group is traditionally close to both Citi and Nomura – and with Nomura working for rival bidder CC Capital, sources were pointing to its defence adviser Citi as the likely lead adviser.

Macquarie Capital and Morgan Stanley are running the auction for NAB.