Bain Capital has raised the ante on its current bidding joust with CC Capital for Insignia Financial by sweetening its initial offer that may provide shareholders with extra reason to say yes.
While Bain’s revised offer of $4.30 does little more than match CC Capital’s $4.30 per share offer, the company said it was open to a deal where Insignia shareholders receive some of their consideration as scrip.
In light of this revelation, Insignia’s board has repeated previous comments that a transaction may not eventuate.
However, while details are light, Jun Bei Liu, who runs Tribeca’s $1.5 billion Alpha Plus fund - which own Insignia shares - suggests Bain’s scrip “component manoeuvre” might be enough to get its big over the line.
“At $4.30, that’s a good price for now. But Insignia obviously had big plans, including costouts and the like,” Lui told The Australian.
“If they can achieve any of that, the potentially the future (pay) is actually quite large. So Bain offering a sweetener in terms of shareholders potentially holding on to some scrip is a good move.”
Based on Morningstar’s analysis, the current bidding war vindicate the firm’s view that Insignia was not only undervalued but has a more positive earnings outlook that 2023-24.
“The firm is recovering from past headwinds that hurt its ability to attract and retain client assets and improve profitability,” said Morningstar equity analyst Shaun Ler.
“These include the royal commission in 2018 and sharp rate rises of 2022–23. Margin expansion prospects are improving, driven by restructuring initiatives such as migrating client funds to more efficient platforms, reducing non-essential costs and an expected recovery in fund flows from cyclical lows.”
Meantime, last Friday, Insignia announced to the ASX that Brookfield had not made an offer on the firm, despite reports that it was actively weighing a bid.
At the time of writing, Insignia Financial Ltd. (ASX: IFL) has a stock price of $4.22 and a market capitalisation of approximately $2.76 billion.