IOOF plans $1bn raising to buy NAB’s wealth unit

Bloomberg

IOOF Holdings Ltd. has agreed to buy National Australia Bank Ltd.’s (NAB) wealth management unit for A$1.44 billion ($1.1 billion) as its transformation gathers pace.
The Melbourne-based investment group will seek to raise A$1.04 billion through a share sale to help finance the purchase of MLC, IOOF said in a statement on Monday. The rest will be funded through debt and a A$200 million loan with National Australia, it said.
It’s the latest move by Chief Executive Officer Renato Mota as he overhauls the business and expands into wealth management, a sector Australia’s biggest banks are exiting after being plagued by scandal. IOOF completed a revised deal to buy Australia & New Zealand Banking Group Ltd.’s pension and investment unit in February.
“This is a once in a generation opportunity to create the leading wealth manager of the future,” Mota said in the statement. “MLC is a natural fit with IOOF and presents a unique opportunity to create value from synergies for the benefit of clients, members and shareholders.”
Australia’s largest banks are compensating customers and exiting wealth management following a public inquiry into misconduct in the financial services industry. Pension funds are consolidating amid increased regulatory scrutiny on fees and performance.
The deal will make IOOF more competitive as the sector transforms to just a handful of “very large funds” managing more than A$300 billion over the next five years, Mota
said on a conference call with analysts and investors.
IOOF will become one of Australia’s pension funds, administering A$173 billion in compulsory retirement savings when the transaction is
completed, it said.
It’s also a boost for National Australia CEO Ross McEwan, as he seeks to execute a turnaround plan after the misconduct inquiry while navigating a period of subdued profit during the coronavirus pandemic. National Australia had planned to spin off MLC by the end of 2019, although the timing repeatedly shifted as the bank grappled with a rising bill for customer remediation and lackluster earnings.
“The sale of MLC will enable NAB to prioritize investment and focus on executing our refreshed strategy,” McEwan said in a statement. “We have a clear plan and we are getting on
with it.”
IOOF will offer the shares at A$3.50 apiece, it said. The stock traded at A$4.26 last week before being halted for the announcement. National Australia rose 0.2% on Monday afternoon in Sydney.
The transaction is expected to be completed by June 2021. National Australia Bank will keep “legal ownership” of MLC’s advice unit to complete the customer compensation programs.