Grosvenor Financial Services is mulling over a potential acquisition to be funded by a mixture of rights issue and debt, according to the group’s joint CEO, Allan Yeo.
Yeo said – if it goes ahead – the purchase should be completed before this Christmas “but it could spill over into early next year”.
He said negotiations with the un-named purchase target were in the early stages.
“Both parties are continuing talks in good faith,” Yeo said.
Grosvenor’s last major acquisition saw it pick up the $600 million Fidelity KiwiSaver scheme in 2013 for a net cost of about $16 million.
In its just-released annual report, Grosvenor indicated it was considering a rights issue of 1 for 10 to existing shareholders at a 10 per cent discount to current share price of $3.40, a source told Investment News NZ (IN NZ).
Yeo said the rights issue – yet to be confirmed – would help fund the prospective purchase, along with debt.
“We’re not going outside existing shareholders to underwrite a rights issue,” he said.
At the same time, the Grosvenor share register tightened recently with a number of long-time investors, including several financial advisers, selling out to the company.
In mid-September about 16 Grosvenor shareholders sold down their stakes in the firm with most shares (about 1.1 million) taken up by the group’s holding company, Asset Custodian Nominees, which now owns 46 per cent of the company.
Yeo said the sell-down was a natural process with the company happy to offer liquidity to those shareholders looking to exit.
“Grosvenor is 18 years old now,” he said. “A lot of those [exiting] investors have been in since day one – many of them would’ve been in their late 30s or 40s then, and are in their late 50s or 60s now.”
He said the ability of Grosvenor to fund the exit strategies showed the strength of the company and “should give comfort to advisers”.
Fidelity Life continues to hold just under 14 per cent (valued at about $5.5 million) of Grosvenor, received in payment – along with $11 million in cash – for selling its KiwiSaver scheme.
According to the Fidelity 2015 annual report, the group had a put option to sell back its shares to Grosvenor at $3.36 per share “within 10 days of 23 August 2015”.
“Subsequent to balance date the company has entered into an agreement to extend the option for an additional 12 months, at a revised price of $3.60 per share,” the Fidelity report says. Based on the current share price of $3.40, Grosvenor would be valued at about $40 million.