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IOOF to buy MLC for $1.4b after FY profit

Wealth manager IOOF Holdings will acquire National Australia Bank’s wealth business, MLC, for $1.44 billion to help save costs and expand its reach.

NAB, Australia’s third-largest bank by market capitalisation, decided in 2018 to divest MLC Wealth but delayed plans due to a management overhaul and the banking royal commission.

IOOF expects the acquisition to be completed by June 30 next year and to deliver $150 million of annual pre-tax cost savings by the third full year of ownership.

IOOF chief executive Renato Mota said MLC went “hand in glove” with the business.

MLC staff were optimistic about the change, Mr Mota said.

“They feel like the shackles are off. They’re part of a business that understands what they do.”

IOOF will fund about $1 billion of the deal value through an institutional placement and entitlement offer.

The rest would be funded with debt, a loan note issued to NAB and existing cash.

NAB said it would book a post-tax loss of about $400 million on the divestment.

Moody’s Investors Service vice president Frank Mirenzi said the royal commission showed the complexity of wealth management, and the sale would reduce risk.

NAB had set aside $1.5 billion as of March 31 for customer-related provisions from wealth management.

The bank’s shares finished even at $17.93.

Meanwhile, IOOF posted a statutory net profit increase of 414.6 per cent to $147 million for 2019/20.

However, this was largely due to its acquisition of the Pensions and Investments business, which is still being integrated.

Underlying net profit was down 34.9 per cent to $128.8 million.

Chief financial officer David Chalmers said the Pensions and Investments integration, and the impact of COVID-19, were the most significant events of the period.

The fully franked final dividend was 11.5 cents per share, down from a 2018/19 fully franked final dividend of 19 cents per share.

Mr Mota and Mr Chalmers said the MLC transaction would give shareholders attractive returns.

Shares were suspended from trade due to the impending share sale.

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