Ann: Update on the ANZ P&I business transaction, page-7

"If you were able to offer up your time, I'd love to hear your opinion on if the ANZ acquisition is ultimately rejected. Given funds were raised at a much higher share price, I'd expect that the deal falling through wouldn't be the worst thing in the world but could be missing something."

@paramizing,

[Given how I misread events over the past 12 months, I'm not sure I'm overly qualified to comment on this stock (!).]

Nonetheless, if the ANZ acquisition fails to occur, then it will be a pity because there is a lot of value to be extracted out of that acquired business. (The prima facie acquistion multiple is around 25x, but when the elimination of duplicated fixed overheads are removed, the multiple would effectively fall to single figures).


It occurs to me that as the months have passed, the likelihood of the transaction concluding has reduced. Which, as I say, is a pity but as you rightly suggest, it is certainly not the end of the world.

Because I suspect that the market has already largely priced in the deal falling over.

Which takes us to the next logical question: what might happen in the event that the acquisition of the ANZ Wealth business does not complete?

Well, IOOF are still net buyers of wealth assets in a market awash with corporations wanting to exit the wealth management space (and on probably even less discerning terms than before ago, given the events of the past 12 months).

So there will be ample other opportunities, no doubt (and probably on better terms for the purchaser than would have been the case before...witness the purchase of Bendigo's financial planning book a few weeks ago, as an example of the generous sort of purchase terms on offer.)

So, if IFL lose out on the ANZ deal, they get their $800m back from ANZ [*] (which will leave them in a $500m net cash position) with which to pursue other value-accretive deals.

And while I am sure they will have been in negotiations in recent months in relation to other acquisitions, in case the ANZ wealth business is not acquired.

Indeed, one of the first purchases they will be able to make when they get their $800m back is IOOF shares themselves, so I would not be at all surprised if a large - $200m in size, possibly - buyback was announced.


[*] Effectively, it would have meant that IFL had $800m sitting in a term deposit with ANZ earning 14% over the past 18 months, which is not at all too shabby and certainly represents a big spread over IFL's own cost of funds.