Researcher Lonsec will remain a standalone independent provider despite its acquisition by Generation Development Group (GDG) and will no longer rate the insurance bond provider’s products.
Confirmed on the ASX on Monday morning, GDG, which also owns Generation Life, went into a trading halt ahead of announcing it will require the remaining 61.9 per cent of Lonsec’s fully diluted share capital for $197.4 million.
The deal values Lonsec at $318.7 million and will be funded by a conditional placement of $49.2 million to Lonsec shareholders and an equity raising of approximately $155.4 million.
Lonsec chief executive Michael Wright says continuing to treat the researcher as a standalone business will allow it to maintain operational independence.
“They’re regulated by APRA since they’re issuing insurance bonds and annuities, and they’re ASX-listed, so with all that comes a different model, different governance checks and different regulatory environments,” Wright tells Professional Planner.
“Whereas for us, research and managed accounts are predominately regulated by ASIC. Having them separate makes sense. The other thing that makes sense is our independence is absolutely critical.”
Wright will report to Generation Life CEO Grant Hackett, who has already spoken to competitors to inform them Lonsec will no longer rate GDG products.
“Our mission is to help Australians make better investment decisions and maintaining our independence, particularly in the research and ratings business, is critical for our future success,” Wright says.
Wright says he has a strong working relationship with Hackett, which goes back to their days together at BT, and currently meets Hackett and GDG chief financial officer Terrence Wong monthly to brief them ahead of quarterly reporting to the ASX.
“This is a big investment for GDG and we’re a significant component of their published earnings and this 100 per cent ownership will take it to another level for them,” Wright says.
In the ASX release, GDG cited the opportunity to “take full control of a familiar asset with further expected significant growth upside” and to “capitalise on growth opportunity in managed accounts”.
Wright will remain CEO after the acquisition. Before Lonsec, Wright led managed discretionary account provider Xplore Wealth, and since leading Lonsec has overseen the acquisition of Implemented Portfolios Limited.
Wright says there had been other expressions of interest from global entities to acquire the researcher, including a private equity firm he declined to name which led to a non-binding indicative offer.
“What was useful for that is it actually set value and it’s clear that overseas there’s this huge arms race for wealth management as they look to consolidate,” Wright says.
“As part of that process Grant was heavily involved because he was a key shareholder and he would have to support that possible deal. We decided to not move forward with that deal for lots of reasons but what it enabled was for all of us to get clear on value.”
Wright says the benefit of the acquisition for advisers will be to give the researcher “deeper pockets” to invest into the company’s services.
“What’s really exciting is the number of new initiatives that we could potentially bring to market,” Wright says.
“We’re potentially going to have deeper capital pockets being associated with a listed entity. That potentially could help us do further M&A which we’ve got a pretty strong record with after Implemented Portfolios, various tuck-ins.”
