GDG to fully acquire Lonsec

Generation Development Group (GDG) has announced it has entered into a binding agreement to acquire the remaining shares in Lonsec that it does not yet own.

In an ASX statement on 3 June, the firm said the acquisition will be funded by a conditional placement of $49.2 million to Lonsec shareholders and an equity raising of approximately $155.4 million.

The firm said that following its "highly successful" investment in Lonsec in September 2020, a move to 100 per cent ownership provides an opportunity for GDG to take full control of a familiar asset with further expected significant growth upside.

Commenting on the transaction, Generation Life chief executive officer Grant Hackett said: “I am excited to announce today that Generation Development Group is embarking on a significant step in progressing its growth strategy through the acquisition of the residual equity interests in Lonsec.

“This acquisition of Lonsec will provide GDG with full ownership of a highly strategic asset in an attractive segment of the wealth management sector. We believe that Lonsec is well-positioned for future growth supported by strong industry and regulatory tailwinds and is expected to provide access to resilient recurring revenue streams from its core research offering. The Lonsec acquisition is expected to be immediately accretive to our earnings.

“Further, we believe the acquisition will allow GDG to utilise the Lonsec Investment Solutions business as a base to consolidate other managed account businesses and deliver significant growth.”

Reacting to the news, Lonsec issued a statement noting that it considers GDG to be a “highly logical partner to accelerate the next phase of Lonsec’s growth”.

“The proposed transaction, which is subject to approval by GDG shareholders, will enable Lonsec to further accelerate its organic and inorganic growth strategy by providing greater access to capital, an expanded product suite and greater market access. The proposed acquisition presents multiple growth avenues to Lonsec including further development of Lonsec Investment Solutions and M&A opportunities,” the firm said.

Quoted in the statement, Michael Wright, CEO of Lonsec, expressed his satisfaction with the transaction, describing it as “an exciting time for Lonsec and a recognition of the strength of the business we and those before us have built for our clients since 1994”. 

“GDG has been a substantial shareholder of Lonsec since 2020 and has a strong understanding of the Lonsec business and is committed to supporting Lonsec in its strategic plans to grow further.

"GDG are an ideal acquisition partner, intending to continue to operate Lonsec predominantly as a separate business, which means continuity of our existing product and service propositions for our clients. This transaction will enable Lonsec to accelerate plans for further investment into its business and we are enthused about the opportunities this deal presents for the business and our clients.”

Last week, GDG, which currently holds a 49.2 per cent stake in Lonsec, announced a trading halt and said it would continue until the earlier of the release of an announcement and the commencement of normal trading on Monday, 3 June.

“GDG confirms there is no other information necessary to inform the market about the trading halt,” the firm said at the time.

A day prior to this announcement, the Australian Financial Review’s Street Talk reported that GDG plans to buy the remaining shares in Lonsec.

In its follow-up announcement on Monday, and the reveal of its major acquisition, GDG said it was inspired to expand its investment because Lonsec has performed well since the initial investment, has significantly contributed to GDG's performance, and is expected to have strong future growth supported by regulatory tailwinds.

The acquisition is also expected to give the firm “increased scope” to further capitalise on the growth opportunity in managed accounts, a market it described as “high growth”.

The equity raising, GDG expounded, will “significantly broaden” its share register and increase institutional representation and interest, supporting a higher free float and potential for improved liquidity.

Last month, GDG reported a 29 per cent boost to its funds under management from $2.5 billion in March 2023 to $3.2 billion a year later.

The firm also reported exceptional growth in Lonsec’s FUM, which in March stood at $10.4 billion – a 27 per cent increase over the preceding 12 months.

Back in 2022, Lonsec acquired a managed discretionary account provider to high-net-worth individuals and affluent retail clients, Implemented Portfolios Limited (IPL).

At the time, the firm stated that its acquisition of IPL increases its FUM to over $5 billion, diversifies its business, and has a positive impact on its earnings and margins before synergies are realised.