Shares in Insignia Financial (ASX: IFL) were up around 4% at the open following the wealth manager’s long-awaited update on the outcome of the $3.35 billion two-horse takeover race between private equity rivals Bain Capital and CC Capital Partners.
Insignia has agreed to accommodate requests by both bidding entities for a four-week extension to the exclusivity period.
It’s understood that both bidders have requested extra time to finalise debt funding and finalise scheme implementation deed terms in response to trade tariff induced share market volatility.
Both bidders increased their takeover offers in March to $5 per share ($3.34 billion), which is a 37% discount to Insignia current share price of $3.70.
Will the deal get done?
While the market appears to have responded favourably to today’s announced extended exclusivity period, there’s growing market uncertainty over whether PE market shootout for Insignia will get over the line.
Even Insignia has reminded the market that there is no certainty either proposal will result in any transaction being put to the company’s shareholders.
As they currently stand, both Bain and CC Capital proposals remain non-binding and indicative.
While Bain put Insignia into play last December, a third bidder, Brookfield subsequently dropped out of the race after failing to see value at the higher price.
Meanwhile, it remains to be seen if these private equity bidders believe Insignia’s platform will be instrumental to Australia’s retail retirement system and end up buying it for the cost out opportunity.
Market movements
Insignia’s earnings are directly correlated to market movements, with around half of its revenue is directly linked to equity markets, on and offshore.
Early March, Insignia’s share price jumped 11% on revelations both bidders had lifted their non-binding bids to $5.00 per share.
At the time, Insignia told the market that "After careful consideration, the Board has determined the terms of each Proposal to be attractive for Insignia Financial shareholders."
Whether either party finally puts a binding offers on the tabled remains to be seen.
At the half year, Insignia reported an underlying net profit after tax of $124 million, up 30% on the previous period.
Statutory net loss after tax (NPAT) of $17 million, improved by $33 million from the previous period, while net revenue was up 1.5% due to strong markets, and up 5.5% on an ongoing basis.
Average funds under management and administration increased by $25 billion (+8.6%) to $320 billion.
Insignia has a market cap of $2.4 billion making it an ASX200 stock; the share price is up 55% in one year and up 4% year to date.
While the stock’s 200-day moving average is trending higher, there is significant evidence that the long-term bullish trend is near an end.
Consensus is Hold.
This article does not constitute financial or product advice. You should consider independent advice before making any financial decisions.
