Equity Trustees (EQT) will purchase Australian Executor Trustees (AET) from Insignia Financial for $135 million, but will separate the latter’s SMSF services and exit that space after completion of the sale.
EQT announced the acquisition to the Australian Securities Exchange (ASX) today, stating the deal is expected to be closed at the end of November, subject to ministerial approval to acquire AET’s trustee licence.
In its ASX announcement, EQT noted that while AET had two divisions – trustee services and platform services – EQT’s main focus in the acquisition was the trustee services division.
“Platform services comprise AET’s SMSF and portfolio management services (PMS), which EQT intends to exit,” it said.
“EQT intends to retain the client management and trustee role for small APRA (Australian Prudential Regulation Authority) funds,” it added, noting these changes would be part of a restructure.
“The platform services restructure is expected to produce a net earnings before interest, taxes, depreciation and amortisation (EBITDA) benefit of $3.5 million per annum and significantly reduce operational complexity from the exit of the PMS and SMSF businesses.”
Funding for the acquisition will come from a $125 million equity raising and a debt facility of $40 million to account for the total purchase price of $135 million, $8 million in estimated transaction costs and $22 million in estimated integration costs.
EQT managing director Mick O’Brien said: “AET is a strong strategic fit with Equity Trustees. The business is highly complementary and provides geographic diversity, establishing a presence in Adelaide and significantly increasing our presence in Western Australia, as well as expanding our presence in Queensland and New South Wales.
“The acquisition delivers significant growth for Equity Trustees, adding $5.4 billion in funds under management, administration and supervision and boosting our overall revenue and EBITDA by more than a third, and it is expected to be earnings accretive.
“It adds scale to our trustee and wealth services private client offering, particularly in our Indigenous and health and personal injury businesses, and supports our ongoing commitment to investment in products, services and technology.”
As part of the deal, EQT and Insignia also announced they have entered into a strategic alliance agreement under which Insignia Financial will become the preferred supplier of certain administration and adviser platform and managed investment scheme services to AET and Equity Trustees wealth customers.
Under the agreement, AET will become the preferred supplier of charitable trusts, small APRA funds and wills and estate services to Insignia Financial and a number of Equity Trustees Wealth Services products will also be added to Insignia Financial investor-directed portfolio services and superannuation platforms.
