Praemium not prepared to recommend Netwealth merger
Platform Praemium believes Netwealth’s proposal to merge undervalues its business and is not in the best interest of stakeholders and its board will be prepared to not recommend the merger to its shareholders.
On 28 October, 2021, Netwealth submitted a non-binding indicative proposal to merge the two entities that would see Netwealth acquire all of the issued shares in Praemium by way of a scheme of arrangement.
According to an announcement to the Australian Securities Exchange (ASX), the proposed transaction represented an equity value for Praemium of $785 million, and an enterprise value of $775 million.
The combined group would be the largest independent wealth management platform in Australia and would account for $72 billion in platform funds under administration (FUA) and over $22 billion in non-custodial assets.
However, Praemium on Monday advised that they acknowledged the strategic benefits of a merger but the proposed transaction did not represent an implied value which the board would be prepared to recommend to shareholders.
“Accordingly, there can be no certainty that the proposed transaction or any other transaction will proceed,” the announcement said.
In an announcement from Praemium, it said the board’s unanimous view was that the proposal:
- Did not appropriately value Praemium’s current performance and near-term trajectory;
- Did not appropriately value Praemium’s market leadership position and superior technology, particularly in managed account and non-custodial portfolios, which would provide significant benefits to Netwealth;
- Did not appropriately value Praemium’s growth momentum, including very strong FUA growth in Q1 FY22, technology enhancements which allowed it to address the broader $900 billion platform market, and strong industry tailwinds;
- Did not reflect the significant valuation upside available to shareholders;
- Did not reflect the relative contribution Praemium would make to a combined entity, based on FUA or revenue under the proposed scrip transaction structure; and
- Was not representative of recent transaction premia in the Australian platform and funds administration space.
Netwealth joint managing director, Matt Heine, said: “Netwealth is confident that the proposed transaction (if implemented) would create a very strong value proposition for existing and future clients and for shareholders of both groups.
“The proposed transaction would ensure that the combined group can continue to lead the industry in net fund flow, technology and client service in what is currently a competitive and rapidly changing platform and advice landscape.
“Praemium shareholders would have meaningful equity in the combined group and benefit alongside Netwealth shareholders from the strategic benefits as well as the costs and revenue synergies that would arise from the merger.”
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