IOOF (ASX:IFL) share price rises as it completes MLC purchase from NAB

Shares in the $2.5 billion financial firm lifted today after it completed the takeover of MLC Wealth from NAB.

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The IOOF Holdings Limited (ASX: IFL) share price is in the green today. At close of trade, shares in the financial institution were trading for $3.95 – up 0.77%. By comparison the S&P/ASX 200 Index (ASX: XJO) is 0.25% lower.

The positive price movement comes after the company completed its acquisition of MLC Wealth from National Australia Bank Ltd (ASX: NAB).

Let’s take a closer look at today’s news.

IOOF share price is up

In a statement to the ASX, IOOF Holdings says it has completed the purchase of MLC Wealth from NAB and will begin running operations from midnight tonight.

The takeover was first proposed in August 2020. It was subject to regulatory approval from both the ACCC and APRA, receiving the former in December and the latter in early May. Both times, the IOOF share price shot up on the news, seemingly spurred on by jubilant investors.

The takeover means total funds under management for IOOF will double to $494 billion. IOOF also claims the purchase of MLC means its existing clients will see lower costs through efficiencies and economies of scale. In the statement, IOOF says the merger will deliver a run-rate of “of between $65 million to $80 million of the estimated $150 million in cost synergies by the end of FY22.”

MLC will become fully incorporated into the IOOF fold, under one leadership and management team, according to the statement.

Management commentary

IOOF CEO Renato Mota said:

This acquisition is truly transformational for IOOF as it positions us as the leader of a new era of wealth management in Australia, giving us a strong platform for future growth.

Today we become a new IOOF. We have the strategic intent, the talent, and now the scale, to deliver our advice-led wealth management proposition to more Australians than ever before. While this acquisition delivers immediate value to our shareholders, we consider its potential for medium and long-term value even more compelling.

He added:

While the financial services industry in Australia is transforming, the wealth management sector system growth continues to be strong, with a five-year compound annual growth of superannuation assets of 9% per annum. A bigger and better IOOF will be positioned to take advantage of these opportunities by being at the forefront of the industry transformation.

IOOF share price snapshot

Over the past 12 months, the IOOF share price has decreased 11.6%.

The company took a hammering from the COVID-19 market sell-off of March 2020 and has only fallen further since then. For perspective, on the last trading day of January 2020, the company’s shares were valued at $7.29 each. Since then, they have fallen by 46%.

IOOF Holdings has a market capitalisation of $2.56 billion.

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Motley Fool contributor Marc Sidarous has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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