An FNZ majority-owned entity is poised to take full operational control of the combined Hatch Invest/Jarden Direct retail stock-trading shop in the first half of next year after shelling out almost $50 million in cash to buy in last August under a deal labelled as a joint venture.
According to the latest Jarden financial statements filed last week, FNZ stumped up $47.5 million in cash plus a 25 per cent stake in Hatch to round out a total purchase price of $56 million for the wealth manager’s direct-to-consumer investment arm.
Under the arrangement, the quarter share in Hatch was priced at $8.5 million, implying the US share-trading platform value was about $6 million lower last August compared to the $40 million FNZ paid Kiwi Wealth to buy the business in October 2021.
“Jarden Securities expects to operate the Jarden Direct business on behalf of Hatch Investment Limited until transition is completed (estimated first half of 2024),” the Jarden Securities report notes. “Hatch will incur substantially all the benefits and risks of the Jarden Direct business during the transition period.”
The Hatch, and now Jarden Direct, business represent a new consumer-facing aspect for FNZ, which historically focused (in NZ at least) on institutional investment and financial advisory back-office technology and custodial services.
FNZ has strong links with Jarden, too, as the now global investment technology powerhouse emerged out of the predecessor firm, First NZ Capital, in the early 2000s.
Former Jarden chief, James Lee, spearheaded the direct business, hiring Fiona Mackenzie (now ANZ funds management chief) as head of direct wealth late in 2017 as consumer investment services such as Hatch, Sharesies and InvestNow all entered the market. In 2017 Jarden also bought the Direct Broking consumer share-trading outfit from ANZ, which still has claims to residual income via Hatch.
Jarden retains a 25 per cent share of the Hatch business for the time-being after booking an almost $45 million capital gain on the Jarden Direct sale last August… after tax (there was none, of course).
The accounts show the Jarden Direct revenue fell to $12.9 million over the 15 months to March 31 this year (the extended reporting period followed a change of end-date for Jarden) from over $18 million during the 2021 calendar year.
But the Hatch move is a relatively minor component of the Jarden structural overhaul as the business seeks to rein-in costs incurred in an expensive investment banking tilt across the Tasman initiated under ex-boss Lee over the last few years.
Under changes flagged late last year, the NZ Jarden wealth arm (including Harbour Asset Management) will move into a separate entity, headed by Malcolm Jackson, from the group’s broking investment banking business: the firm created two new NZ corporate entities – Jarden One and Jarden Two last month.
During the tumultuous 15-month period to March 31, Jarden reported a total net operating loss of $40.3 million and net cash outflows of $101 million.
The investment banking arm received a $64 million capital injection from shareholders in the reporting period with debt and overdraft facilities of more than $61 million (of which $50 million had been used as at March 31) due to be rolled over this month.
Last week the Australian Financial Review reported the Jarden Australia investment banking business turned a maiden profit in the June quarter with the publication separately flagging FNZ as a potential minority shareholder in the Jarden Wealth entity. In a statement, Jarden confirmed that FNZ does not hold stakes in any of its related entities (bar the Hatch joint venture).
Meanwhile, FNZ notched up a major milestone across the Tasman with the launch of the new Colonial First State ‘CFS Edge’ investment platform. FNZ technology underpins the CFS Edge adviser-focused service, which targets the burgeoning Australian ‘managed accounts’ market (similar to discretionary managed investment services in NZ).
In July, the global FNZ group also ventured into new territory with the launch of its first investment product – an institution-targeted managed cash facility, FNZ Yield Plus notes.
“The notes are available in a cost-effective format as FNZ underwrite all the costs against a single low basis point charge,” the release says. “The notes are available in USD, EUR, GBP and may be customized for other currencies… The FNZ Yield Plus notes can also be customized, white-labelled, and curated for distributors.”
FNZ was unable to confirm prior to publication whether the new cash management tool would be available to professional investors in Australia and NZ.