The IOOF Holdings Limited (ASX: IFL) share price fell as much as 5% in early trade after the financial service provider announced the completion of its acquisition of the Australia & New Zealand Banking Group Limited (ANZ) Pensions and Investments business (P&I). Final completion occurred on Friday evening, 31 January 2020.
At the time of writing, the IOOF share price is down by 2.66% to $7.63, on a day that has seen the S&P/ASX 200 (INDEXASX: XJO) fall sharply by 1.53% at the time of writing.
What are the acquisition details?
IOOF announced a renegotiated sale price of $825 million for the P&I business (down $125 million from the original $950 million) back in 17 October 2019.
As at 31 December 2019, IOOF’s P&I business had funds under administration of $48.2 billion and funds under management of $26.8 billion. Underlying net profit after tax (UNPAT) for the P&I business for the half year ended 31 December 2019 was $42.3 million.
IOOF’s annualised pro-forma financial performance of the P&I business and the ex-ANZ Aligned Licensees (ANZ Wealth Management), which are both now owned by IOOF, is estimated to be approximately $63 million per annum.
IOOF has revised its estimated cost synergies to $68 million pre-tax per annum (from $65 million pre-tax per annum). An estimated $13 million of those savings have been achieved by ANZ prior to completion. Cost synergies are expected to be realised in full from 1 July 2023.
Given the synergies discussed above, IOOF expects the acquisition to deliver significant earnings per share accretion above what it had initially estimated when first announcing the transaction.
In its 1H20 guidance, IOOF expects UNPAT for the half year to 31 December 2019 to be in the range of $61 million to $63 million (unaudited).
On a continuing operations basis (excluding Ord Minnett, AET Corporate Trust and Perennial Value Management) the UNPAT range is expected to be $56 million to $58 million (unaudited).
IOOF will be reporting its result for the 6 months to 31 December 2019 at 11am on 18 February 2020.
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