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IOOF Holdings Limited swoops on SFG AUST FPO

IOOF Holdings Limited (ASX: IFL) and SFG AUST FPO (ASX: SFW) have announced a proposal, to merge the two respective financial services companies into one. The implied value of the deal values SFG at 90 cents per share, which is a 23% premium to its last traded price.

The announcement will likely put an end to speculation of SFG making a play for accounting firm consolidator Crowe Horwath Australasia Ltd (ASX: CRH). This marks a continuing trend of consolidation amongst financial services players in general and a continuation of the growth by acquisition strategy of IOOF, in particular.

The proposed merger will now be put before SFG shareholders to vote on. Shareholders will have the opportunity to receive a combination of cash or IOOF shares, assuming the vote is passed.

For investors, once again the potential to undertake a profitable takeover arbitrage opportunity may be present. However with only $100 million of the merger to be paid in cash and the rest in IOOF equity, the opportunity won’t be clear cut.

IOOF continues to expand through acquisition, but other financial sector firms look set to become more active as well. Perpetual Limited (ASX: PPT) recently stated that it would look to grow through acquisitions and partnering. Investors should consider positioning their portfolio to benefit from a pick-up in merger and acquisition activity.

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Motley Fool contributor Tim McArthur owns shares in Perpetual Ltd.

 

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