Do analysts think that Netwealth shares are worth looking at with this in mind?
The proposed takeover
Netwealth was offering one new Netwealth share for every 11.96 Praemium shares, plus a cash consideration.
The cash consideration would reflect the net proceeds achieved from the sale process for Praemium’s international operations of more than an attributed value of $50 million less tax and transaction costs.
Based on the closing price of Netwealth shares of $17.94 on 27 October 2021, which was the last trading day before the date of the proposal, the offer was a value of $1.50 for each Praemium share, excluding the international sale consideration.
Netwealth said this offer was a 29% premium to Praemium’s closing price on 27 October 2021.
The fintech said that if the deal went ahead, it is expected to create substantial value for both sets of shareholders, due to the compelling strategic rationale and the “material” cost and revenue synergies.
Netwealth said it would enhance its position as the fastest-growing wealth management platform in Australia, with approximately $16 billion of net flows for the 12 months to 30 September 2021.
The combined group would account for around $72 billion of Australian platform funds under administration and more than $22 billion of non-custodial assets.
The Netwealth share price has edged lower since this announcement, but only by 1.6%.
The Praemium response
Praemium’s initial response was to decline the offer. The board unanimously concluded that the proposal undervalued the business for a few different reasons.
It said that it doesn’t appropriately value the current performance, the near-term trajectory, its market leadership and “superior technology” particularly in managed account and non-custodial portfolios, which would provide “significant benefits” to Netwealth.
Praemium also said the offer doesn’t value its growth momentum, including “very strong” FUA growth in the first quarter. The board also noted that it doesn’t reflect the significant valuation upside available to shareholders considering it’s valued at a discount to industry peers Netwealth and Hub24 Ltd (ASX: HUB). The final point that Praemium noted was that it wasn’t representative of recent transaction premiums in the platform and funds admin space.
The smaller fintech also noted that its share price closed at $1.245 on 1 November 2021, and based on the exchange rate and Netwealth share price, meant the premium was only 17.6%.
Praemium’s board said:
As a strong, rapidly growing independent player in the platform and funds administration industry, Praemium is in a unique position. The board is open to engagement at an appropriate valuation but is mindful that any proposals put forward should appropriately reflect Praemium’s market position and growth potential as well as recent activity in the sector.
Is the Netwealth share price a buy?
Brokers at Macquarie Group Ltd (ASX: MQG) think it is, with a price target of $19. Macquarie thinks buying Praemium would add to Netwealth. Macquarie thinks the fintechs have a good future and the more they can grow the better.