Australia & New Zealand Banking Group Ltd. will sell its pensions and investments and aligned dealer groups businesses to IOOF Holdings Ltd. for a cash consideration of A$975 million.
IOOF has agreed to acquire ANZ's OnePath Pensions and Investments business and four aligned dealer groups, namely Millennium3, RI Advice, Elders Financial Planning and Financial Services Partners.
The transaction will be funded through a combination of a fully underwritten institutional placement worth about A$450 million, which launched Oct. 17, a share purchase plan to raise up to about A$100 million and the balance funded through fresh debt facilities.
Following the deal completion, ANZ said it would see an estimated accounting loss of about A$120 million, which includes sale proceeds of A$975 million, separation and transaction costs of about A$300 million after tax and an accounting adjustment of about A$500 million for treasury shares. The sale is also expected to raise ANZ's common equity Tier 1 capital ratio on an Australian Prudential Regulation Authority basis by about 15 basis points.
IOOF said in a separate release that it estimated the separation and integration costs to be about A$130 million, which would be spent over three years. The company also expects to generate pretax cost synergies of about A$65 million per year from fiscal 2021, with further potential for improved revenue.
In addition, the two companies will enter into a 20-year strategic alliance agreement, under which ANZ will distribute IOOF's wealth products through its Australian banking network.
The deal, expected to close in about 12 months, is subject to certain conditions, including regulatory approvals and the completion of the extraction of the OnePath Pensions and Investments business from OnePath Life Insurance.
ANZ embarked on a strategic review of its wealth businesses in Australia and New Zealand in November 2016, and concluded that it does not need to manufacture life and investment products. Most recently, the bank responded to media speculation about receiving bids for the unit, saying it was still in talks with several parties and was working through options, including exploring capital market solutions for its wealth division to create a standalone business.
Nomura and Gilbert + Tobin are advising IOOF on the transaction.