This is a big deal for CUP shareholders. CUP’s largest...

This is a big deal for CUP shareholders.

CUP’s largest shareholder (soon to be called ‘CFS Group’) just became the most likely acquirer of CUP.

CBA will demerge its wealth management businesses into a separately listed entity. This will now be a pure play independent wealth management group with a platform business, investment management, financial advice, mortgage broking and minority holdings in CUP and MOC.

It makes perfect sense for this new entity to eventually acquire the remaining shares in CUP because of:

1. CUP is now potentially a core business focus for the demerged CFS Group. This wasn’t the case for CBA previously.
2. CFS Group still need to protect the value of Count Financial by securing CUP prior to the completion of the 10 year agreement ending 2020.
3. Where as previously the market was anticipating CBA would sell its 36% holding in CUP as it was non-core, it now makes more sense for CFS to buy the remaining shares it doesn’t own.

Well played by CBA. Instead of selling off their advice businesses in a fire sale process they now have a means to maximise the value of their wealth assets and pursue growth in that sector.

Still needs to get regulatory approval, but if this goes ahead it becomes likely that CUP is eventually acquired by CFS Group, probably in the next 12 months or so.

In the meantime hopefully CUP management can make a few more decent acquisitions to increase the price CFS will have to pay should they want to mop up the rest of the shares.