NAB’s sale of MLC Wealth to IOOF will add 30 basis points to the bank’s common equity tier 1 capital ratio, boosting it to 11.9 per cent.
The bank announced yesterday that it has entered into a sale agreement to sell 100 per cent of MLC Wealth for A$1.44 billion. The bank will receive $1.24 billion in cash and $200 million in the form of a five-year structured subordinated note in IOOF.
The idea of the note is to “provide NAB with the opportunity to participate in the potential value created through the combination of MLC and IOOF over the medium term”.
In addition, NAB expects to receive a pre-completion dividend of around $200 million from MLC.
Evans and Partners analyst Matt Wilson described the transaction as a “clean exit” from wealth, avoiding the alternatives of a spinoff to existing NAB shareholders with no capital benefit, or a sale to private equity with ongoing investment commitments.
JP Morgan analyst Andrew Triggs said the sale multiple looked “quite attractive” and gives the bank a significant capital buffer that removes much of the capital risk during the downturn.
The deal will result in a post-tax loss of around $400 million, based on the carrying value of MLC of $1.86 billion at June 30. The final loss will depend on separation and transaction costs, and net assets at completion.
NAB said the option of divesting MLC as a standalone business would have involved additional separation costs.
The transaction includes MLC’s advice, platform, superannuation, investment and asset management businesses.
NAB will retain legal ownership of MLC’s advice entities for the purpose of completing advice-related remediation programs.
NAB will continue to offer wealth management products and services through JB Were and nabtrade. NAB and IOOF will enter into a strategic partnership that will cover a range of products and services, including a financial advice referral service.