Conceding there is a lack of interest from key Diverger shareholders, COG has formally withdrawn its counteroffer for the listed licensee.
In an announcement to the ASX on Wednesday morning, COG said it continues to believe the offer it made at the end of October was a superior proposal to a bid launched for Diverger in September by the listed licensee Count.
COG’s announcement said it had “formed the view that [Diverger’s] major shareholders who could control the vote on the offer, in the absence of any public statements to the contrary, are unlikely to vote in favour of COG’s offer”.
After the Count takeover was announced in September, Diverger was punted squarely into play by the emergence of the second takeover offer, albeit non-binding and conditional.
The possibility of competing bids for Diverger, which includes the GPS Wealth licensee, is further evidence of licensee businesses exploring ways to achieve scale and to develop new technology, services and revenue streams to support their advisers.
Count has already acquired the risk-orientated Affinia licensee from TAL, and the addition of Diverger to the fold would lift group adviser numbers to more than 770, based on data provided to Professional Planner by Adviser Ratings and current as of 19 October. A combined Count/Diverger group would rank (also based on Adviser Rating numbers) as the third-largest licensee group, behind only Insignia with 955 advisers and AMP with 872.
It’s the second time in just over a year that Diverger has been involved in takeover activity. In June 2022 it bid about $65 million to acquire the listed Centrepoint Alliance. Diverger went into it holding a call option over 19.99 per cent of the issues shares in Centrepoint, but still couldn’t get the deal over the line and withdrew the offer in August 2022.
Count announced on 22 September this year that it intended to acquire Diverger in a cash and scrip deal that valued the target at $1.14 a share, or about $43 million. The Diverger board unanimously supported the Count offer in the absence of a better offer, and the companies entered a binding scheme implementation arrangement.
Those plans were initially thrown into doubt after the COG bid was made, which valued the business at $1.41 a share, or about $53 million.
In a statement to the ASX dated 30 October, the Diverger board said it did not consider the COG offer to be superior to Count’s, while earlier this month Count managing director Hugh Humphrey told Professional Planner that the firm had the right to match any rival bid.
A Stock Focus report from 31 October issued by broking firm E&P, seen by Professional Planner, suggested Count could still have lifted its earnings per share (EPS) if it were to have matched COG’s bid, but that seems unlikely to happen now the COG offer has been withdrawn. Diverger shares fell back from a closing price of $1.21 on November 14 to be trading at $1.11 at the time of writing on Wednesday.
In the absence of any other surprise bidders, the way now is clear for the Count acquisition of Diverger to proceed. Count managing director Hugh Humphrey told the company’s annual general meeting in Sydney on Tuesday that the Diverger acquisition was a compelling strategic fit with Count, that it would generate material synergy and efficiency benefits, it would provide further incremental growth opportunities, and also represented a strong cultural fit with the Count business.
COG’s likelihood of succeeding receded somewhat last week when HUB24 advised the ASX it had lifted its interest in Diverger to 34.38 per cent after buying 1.1 million Diverger shares on-market at $1.26 each. It’s allowed to do this under the so-called “creep” rule, which allows a shareholder with at least a 19 per cent stake in a company to acquire an additional 3 per cent in each six-month period without having to launch a formal takeover bid.
At the time of its investment in Diverger (then called Easton Investments) in October 2020, Diverger said HUB24 would become a strategic technology partner and Diverger would become an anchor partner to technology developed by HUB24 to support Diverger’s licensee services to advisers and advice businesses.
HUB24’s investment in Diverger is only part of a program of recent strategic investments. It acquired SMSF administration platform Class last year, and it acquired client portal myprosperity in May this year, with the intention of offering a single client front-end across HUB24, Class, NowInfinity (compliance solutions) and HUBConnect (integrated data feeds).
Bringing Diverger and Count together, and potentially maintaining HUB24’s involvement as a strategic investor and partner, was always going to be a tough offer to beat.
