IOOF adopts Plan B

Acquisitions are the order of the day in the wealth management sector

IOOF (ASX: IFL) has made a friendly takeover offer for Plan B (ASX: PLB) and Plan B directors have recommended shareholders accept the all-cash offer.

IOOF is paying $49.1 million cash which is $0.60 per share for Plan B and the takeover is to be fully funded via a bank loan on normal commercial terms.

The acquirer is one of Australia’s largest wealth management and financial services groups with approximately 1,000 advisers and $110.2 billion in funds under management, administration, advice and supervision (or ‘FUMAS’) as of March 2012.

Commenting on the acquisition, IOOF’s Managing Director Christopher Kelaher said “The acquisition of Plan B represents a unique opportunity to combine two highly complementary businesses.  The recent market volatility has illustrated the importance of size and scale in terms of competitive position. This transaction gives IOOF greater representation in the fastest growing markets in Australia and importantly provides access to the New Zealand retirement savings market for the first time.”

IOOF has made a number of takeovers and has a strong history in cost containment while executing and integrating acquisitions and should continue to generate profits provided that the market does not suffer a major downturn. IOOF is considered to be is a well-managed company with a conservative balance sheet and good cash flow. In the first half of this financial year, it announced a fully franked dividend of $0.19 per share.

Wealth managers such as AMP (ASX: AMP), Perpetual (ASX: PPT) and Treasury Group (ASX: TRG) benefit from Australia’s compulsory superannuation system. While super contributions are to rise from 9% to 12% in the coming years, the dynamics of the industry may change with the banning of upfront and trail commissions and the need to offer a low fee MySuper product Investors will need to choose their investments in this sector carefully.

More reading

Motley Fool contributor Tony Reardon owns shares in AMP. The Motley Fool‘s purpose is to help the world invest, better. Take Stock is The Motley Fool’s free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. Click here now to request your free subscription, whilst it’s still available. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

Wondering where you should invest $1,000 right now?

When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for more than eight years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

Scott just revealed what he believes could be the five best ASX stocks for investors to buy right now. These stocks are trading at near dirt-cheap prices and Scott thinks they could be great buys right now.

*Returns as of May 24th 2021

More on Investing