It's a bleak day for the ASX. But that didn't stop the Xplore Wealth Ltd (ASX: XPL) share price from surging to a two-year high due to a takeover.
The Xplore share price surged 188% to 19 cents during lunch time trade even as the All Ordinaries (Index:^AORD) (ASX:XAO) and the S&P/ASX 200 Index (Index:^AXJO) tanked by around 1.5% each.
There aren't many stocks trading in the black today due to a large sell-off on Wall Street overnight. But the wealth platform company is bolstered by merger and acquisition (M&A) action.
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M&A fever fires up the Xplore share price
It's larger rival Hub24 Ltd (ASX: HUB) will acquire the company via a scheme implementation agreement.
The bidder completed its $50 million placement today to help fund the takeover. It's looking to raise up to an extra $10 million via a share purchase plan.
Hub24 is going for a hat trick. It will use the proceeds from the new share price to make two other investments. The first is the acquisition of Ord Minnett's portfolio administration and reporting services (PARS) asset.
Multiple transactions shake-up wealth industry
Hub24 will also acquire a 40% interest in Easton Investments Ltd (ASX: EAS). As part of this investment, Easton will purchase Hub24's Paragem business, reported Money Management.
The transaction will give Easton 670 advisors from Paragem. This will make Easton the fifth largest dealer services group in Australia.
Meanwhile, the three strategic transactions will strengthen Hub24's position as the leading provider of integrated platforms, data and technology services for financial advisers, stockbrokers and private banks.
Hub24 joins Xplore's share price parade
The market seems to like what the bidder is saying. The Hub24 share price surged 8% to a record high of $22.64 at the time of writing.
"The successful completion of these transactions, which include the acquisition of Xplore Wealth and Ord Minnett's PARS, will result in a 47% increase in custodial FUA, around 400 new adviser relationships and the expansion of non-custody administration FUA [funds under advice] to $14 billion," said Hub24's chief executive Andrew Alcock.
"For a total consideration of $93m, including integration and transaction costs, these compelling transactions are expected to return approximately 13% improvement in EPS to shareholders in FY22."
Outlook for M&A in 2021
We haven't seen many M&A's this year as the COVID‐19 pandemic may have scuttled plans. Having said that, the proposed takeover of Coca-Cola Amatil Ltd (ASX: CCL) will put M&A back on the agenda for 2021.
This means we will probably see a pick up in the number of takeovers. The fallout from COVID-19 presents opportunities for those lucky enough to be cashed up.
