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UPDATE 2-Australia's IOOF Holdings to pick ANZ pension assets cheaper, shares jump

Published 17/10/2019, 01:47 pm
© Reuters.  UPDATE 2-Australia's IOOF Holdings to pick ANZ pension assets cheaper, shares jump
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* IOOF shares at 10-month high

* ANZ cites "changing market conditions" for lower ask

* Deal expected to close in by Q1 2020 (Adds analyst comment, share performance, background on inquiry)

By Rushil Dutta

Oct 17 (Reuters) - Australia's IOOF Holdings IFL.AX said on Thursday it agreed on a cheaper purchase price for Australia and New Zealand Banking Group's ANZ.AX pension assets, giving its shareholders another reason to rejoice after a landmark court case win last month.

ANZ cut the asking price for OnePath assets by 13% to A$825 million ($560.01 million), citing "changing market conditions" after an inquiry last year turned up the regulatory heat on Australia's financial institutions while a protracted U.S.-China trade war roiled global financial markets.

IOOF, among the worst affected by the Royal Commission inquiry, posted a sharp fall in annual profit in August after compensating aggrieved customers.

However, the company won a high-profile case last month against the banking watchdog, which failed to prove that the Australian wealth manager had breached pension laws. ruling was the first in a case that originated directly from last year's probe into the financial sector and had sent the company's shares sharply higher.

The IOOF stock, which rose 11% to a 10-month high on Thursday, has added over 30% so far this year - a heady reversal from last year's wipeout that came on the heels of the inquiry.

"It certainly is a rosier picture (for IOOF) compared with what it was not quite so long ago," said James Tao, a market analyst at CommSec.

"The success of the case against regulators and now the fact that they managed to bag the ANZ deal in a better shape than what was expected before has provided IOOF with a much better picture," Tao added.

Buying the pension assets would help IOOF gain a bigger foothold in the market, Tao said.

In a separate statement, ANZ said it expected the deal to close in during the first quarter of 2020 after the trustees of OnePath and the bank gave the deal a green light.

While merger-and-acquisition deals often face roadblocks, delays in the OnePath sale - announced late-2017 and earlier expected to close the following March - implied the strong impact the Royal Commission was having on the country's top lenders' decision making.

"Despite a challenging operating environment for wealth management, the strategic rationale for the transaction remains compelling and we continue to be confident in the significant benefits it will deliver," ANZ said.

($1 = 1.4732 Australian dollars) (Additional reporting By Aby Jose Koilparambil in Bengaluru; Editing by Christian Schmollinger and Sherry Jacob-Phillips)

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