Learn To Invest
Stocks Special Reports LICs Credit Funds ETFs Tools SMSFs
Video Archive Article Archive
News Stocks Special Reports Funds ETFs Features SMSFs Learn


IOOF acquisition of ANZ OnePath on shaky ground after further delays

Emma Rapaport with AAP  |  16 Jan 2019Text size  Decrease  Increase  |  
Email to Friend

ANZ Bank Logo

Embattled wealth group IOOF says its contract covering buyout of ANZ's pension and investments business OnePath has been delayed by at least three months, amid doubts over the deal's future.

In a stock exchange filing on Tuesday, IOOF (ASX: IFL) said its deal to buy part of ANZ's pension unit (ASX: ANZ) would now take place after Australia's third-largest bank had formally split its pension assets, which IOOF expects to occur by 1 July.

When the companies announced the deal in October 2017, they said they expected it to be wrapped up by the end of March this year.

The contact has been amended to provide more time for the trustee to decide on the deal and to provide ANZ more input on the deal.

Despite IOOF's confidence that it will eventually be successful in acquiring OnePath Pension and Investments business, Morningstar financial services analyst Chanaka Gunasekera is unconvinced.

In a research note, he said the regulator’s actions seeking disqualification orders against five of the company's key officers, in addition to imposing additional licence conditions, make it unlikely that the trustee, OnePath Custodians, will approve the successor fund transfer to IOOF-related parties.

Investing Compass
Listen to Morningstar Australia's Investing Compass podcast
Take a deep dive into investing concepts, with practical explanations to help you invest confidently.
Investing Compass

"Under the circumstances, we believe it will be difficult for the pensions and investments trustee to conclude such a successor fund transfer is in the best interest of members," he said. 

Gunasekera also expects next month’s royal commission final report, which will cover IOOF's disastrous appearance at the fifth round of hearings, to deliver sharp criticism and further damage IOOF's chances of receiving the trustee’s and ANZ Bank's consent to the acquisition.

IOOF Royal Commission

The banking royal commission put IOOF under the blow-torch in August 2018

Gunasekera believes yesterday's announced contract changes were designed to delay the decision on the deal until after the publication of the royal commission final report, the government's and opposition party responses, and after the federal election, tipped for mid-May.

Royal commission takes its toll

Though many merger-and-acquisition deals experience delays, the new timeline shows the impact the royal commission is having on major decisions of the country's top lenders, even before the inquiry delivers its final report.

IOOF was among the worst-hit companies by the inquiry, which aired claims that IOOF used member assets when compensating them for losses allegedly caused by the wealth manager or their service provider.

The evidence caused financial watchdog the Australian Prudential Regulation Authority (APRA) to recommend banning IOOF's top two executives from running the wealth manager, prompting the pair to step down in December and the company's shares to drop.

IOOF has also agreed to several licence conditions required by APRA to improve its corporate governance.

ANZ, in a separate statement, said the contract amendments would allow it to sell its OnePath Life business to Zurich Financial Services Australia regardless of the IOOF delay. An ANZ spokesman declined to comment about the time frame of the IOOF sale.

Shares of ANZ were up 0.67 per cent at $25.71 at 2pm Sydney time, and IOOF was up 0.54 per cent at $5.59. Morningstar held IOOF's fair value at $5.00 per share following the acquisition update.

. Emma Rapaport is a reporter for Morningstar Australia.

© 2022 Morningstar, Inc. All rights reserved. Neither Morningstar, its affiliates, nor the content providers guarantee the data or content contained herein to be accurate, complete or timely nor will they have any liability for its use or distribution. This information is to be used for personal, non-commercial purposes only. No reproduction is permitted without the prior written consent of Morningstar. Any general advice or 'regulated financial advice' under New Zealand law has been prepared by Morningstar Australasia Pty Ltd (ABN: 95 090 665 544, AFSL: 240892), or its Authorised Representatives, and/or Morningstar Research Ltd, subsidiaries of Morningstar, Inc, without reference to your objectives, financial situation or needs. For more information, refer to our Financial Services Guide (AU) and Financial Advice Provider Disclosure Statement (NZ). Our publications, ratings and products should be viewed as an additional investment resource, not as your sole source of information. Morningstar’s full research reports are the source of any Morningstar Ratings and are available from Morningstar or your adviser. Past performance does not necessarily indicate a financial product's future performance. To obtain advice tailored to your situation, contact a licensed financial adviser. Some material is copyright and published under licence from ASX Operations Pty Ltd ACN 004 523 782. The article is current as at date of publication.

Email To Friend