SYDNEY, AUSTRALIA: EQT Holdings Limited (ASX: EQT) will acquire Australian Executor Trustees (AET) from SFG Australia Limited, a wholly owned subsidiary of Insignia Financial Limited (ASX:IFL) for total cash consideration of $135 million.
The acquisition will be funded through a combination of debt and equity, including $125 million from an equity raising, comprising a $40.4 million institutional placement and a $84.6 million 1 for 6 accelerated pro-rata non-renounceable entitlement offer, and $40 million from the drawdown of an additional debt facility with Australia and New Zealand Banking Group Limited (ANZ).
EQT’s Chair Carol Schwartz said, “This is a transformative acquisition that enhances Equity Trustees’ capability in private client trustee services while growing shareholder value.”
EQT’s 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 FUMAS 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 (“TWS”) 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.”
AET is a well recognised provider of professional private client trustee services in Australia, with more than 140 years of experience in providing specialised estate and trustee services.
In FY22 AET oversaw more than $6.9 billion in Funds Under Management, Administration, Advice and Supervision (“FUMAS”). On a standalone basis, in FY22 AET generated revenue of $38.1 million.
The business offers a comprehensive range of services across Australia through two divisions – Trustee Services and Platform Services. EQT’s primary focus is the Trustee Services division. Platform Services comprise AET’s Self-Managed Super Funds (“SMSF”) and Portfolio Management Services (“PMS”), which EQT intends to exit. EQT intends to retain the client management and trustee role for Small APRA Funds (“SAF”) (together, the “Platform Services Restructure”).
Acquisition Strategic and Economic Rationale
The acquisition has compelling strategic and economic rationale for EQT. Delivers significant growth for the group
• Adds $5.4 billion of TWS Private Client FUMAS (post Platform Services Restructure)
• Boosts overall revenue by 35% and EBITDA (proforma) by 41% in FY22 including Net Synergy Potential
• EPS accretive – expected to generate mid to high single digit EPS accretion in FY24 on a pro-forma basis and double digit accretion when Additional Investment Revenue in relation to the Trustee Services business of $3.3 million is included
• Access to synergies – Platform Services Restructure is expected to produce a net EBITDA benefit of ~$3.5 million p.a. (on a fully realised basis) and significantly reduce operational complexity from the exit of PMS and SMSF businesses. There is also an opportunity to generate Additional Investment Revenues in relation to the Trustee Services business from internally managing some investments (where in the best interest of clients); expected to generate $3.3 million of additional revenue and EBITDA in FY24, with some potential for this to increase in subsequent years (“Additional Investment Revenue”) (collectively, “Net Synergy Potential”).