Commonwealth Bank of Australia will sell its global asset management arm to Japan’s Mitsubishi UFJ Financial Group for $4.1 billion in a deal that will considerably reduce the scale of the wealth operations the bank still plans to spin-out into a separate company.
CBA confirmed on Wednesday media reports out of Japan it had agreed to sell its global asset management business Colonial First State Global Asset Management (CFSGAM). The business is known outside Australia as First State Investments.
The $4.1 billion sale price values GFSGAM at 17.5 times its pro forma 2018 earnings of $236 million. After tax, this will represent a gain of approximately $1.5 billion to CBA. Approximately $100 million of the $1.5 billion will be spent on post-tax separation and transaction costs.
The deal, one of the biggest overseas asset management buyouts ever by a Japanese financial group, is scheduled to close in mid 2019 and will have to jump multiple regulatory hurdles in Australia, Japan, Hong Kong, Singapore, the United Kingdom and the United States.
Wednesday’s deal means CBA’s initial public offering of its wealth management arm will no longer include CFSGAM. And it is the second change of tack in how the bank plans to extricate itself from the troubled wealth management industry.
In April CBA said it would pursue an initial public offering of CFSGAM, on the Australian Securities Exchange by the end of calendar 2018.
The bank then flipped its strategy again in June to instead pursue a spin-off of all its wealth and mortgage broking businesses, including CFSGAM, in a vehicle to be known as CFS Group. The listing was set to be worth $7 billion to $8 billion on the ASX.
The spin-off will now only include Colonial First State, Count Financial, Financial Wisdom, Aussie Home Loans and CBA’s minority shareholdings in ASX-listed companies CountPlus and Mortgage Choice.
This new company, which seems to have also shed the CFS Group moniker, will be led by Jason Yetton, who left marketplace lender SocietyOne in early July to pursue other opportunities.
CFSGAM is a global investment management business with established offices across Europe, the US and Asia Pacific regions.
As of June 2018, CFSGAM managed $213 billion of assets on behalf of institutional investors, pension funds, wholesale distributors, investment platforms, financial advisers and their clients worldwide.
Mitsubishi UFJ is one of the world’s largest financial institutions with $912 billion in assets under management.
CBA chief executive Matt Comyn said: “CFSGAM is a high quality business that has achieved strong growth under CBA’s ownership for over 18 years. MUTB is one of the largest asset managers in Japan, with a long history and deep capabilities. We believe that CFSGAM’s clients and employees will benefit from MUTB’s supportive long-term ownership.
“Today’s announcement represents another important milestone in CBA’s strategy to focus on its core banking businesses and to create a simpler, better bank. The sale of CFSGAM to MUTB represents significant value for CBA shareholders and is a positive outcome for CFSGAM clients and employees,” Mr Comyn said.
MUTB chief executive Mikio Ikegaya said: “We are delighted that CFSGAM, a highly distinguished, diverse and growing asset manager, is joining our group. We expect CFSGAM will continue to deliver leading investment solutions to its existing global client base. We also believe CFSGAM’s highly seasoned investment teams and competitive product line-ups will enable us to deliver new investment opportunities to our clients. We look forward to welcoming the full CFSGAM team to our group.”
More to come