IOOF bid for DKN follows Snowball tilt at Shadforth
Tim Boreham From: The Australian June 14, 2011 12:18PM
THE emerging shakeout of the financial advisory sector gained pace today as IOOF lobbed an indicative $108 million proposal, at 75 cents a share, for smaller advisory rival DKN Financial.
The move comes hard on the heels of Snowball Group's $200m takeover offer for the unlisted Shadforth Financial Group. The backdrop, of course, is the government's Future of Financial Advice reforms, which will increase compliance costs and favour those players with economies of scale.
DKN has funds under administration of $7.92 billion - mainly in platforms - and covers 300 wealth-management practices (as well as 750 associate advisers). It also fully owns the Lonsdale dealer group.
IOOF, which already has 18 per cent of DKN, has $104bn in funds, which makes DKN a snack rather than sit-down meal.
Given its robust balance sheet, IOOF has been seen as a likely acquirer, so the DKN tilt shouldn't leave too many mouths agape. Then again, no one would have been surprised had IOOF (market cap $1.5bn) fallen prey to a bigger rival, such as a bank.
Both parties have been acquisitive in their own right: IOOF bought the Australian Wealth Management advisory business (formerly part of Tower) and then Skandia. Only last week, DKN made a minority investment in the Sydney-based StrategyOne Advise Network.
IOOF's offer is pitched at a 47 per cent premium to Friday's closing price, which looks especially attractive in the current torrid market. Then again, there's no such thing as Father Christmas in takeovers, seasonal or otherwise: given DKN shares have retreated from 65c at the start of the year, IOOF could well be accused of being opportunistic.
Adding to the intrigue, Zurich is DKN's biggest holder on a 31 per cent stake, while the listed Count Financial is lurking on about 7 per cent.
With DKN in a trading halt, Criterion can only counsel a HOLD.
IOOF shares look a LONG-TERM BUY for those able to look beyond the gloom.
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