(Recasts and writes through)
By Byron Kaye and Paulina Duran
SYDNEY, Aug 31 (Reuters) - Australia's IOOF Holdings Ltd IFL.AX said it will buy National Australia Bank Ltd's NAB.AX financial advisory arm for A$1.4 billion ($1.1 billion), making it the country's biggest retail wealth management firm.
The deal underscores a dramatic reshaping of Australia's retail finance industry after a public inquiry exposed regulatory scandals at the country's top lenders, forcing them to carve off non-essential businesses. Both IOOF and rival AMP Ltd AMP.AX , the country's oldest wealth advisory firm, were also hit hard by the inquiry.
The purchase of MLC, which follows IOOF's acquisition of wealth management assets from Australia and New Zealand Banking Group Ltd ANZ.AX last year, will take its number of financial advisors to 1,884 in total, topping AMP's 1,847.
It will also have the most retail funds under management - A$196 billion compared to Bankers Trust's A$153 billion and AMP's A$141 billion.
"We sincerely believe that this is ... transforming the shape of the industry," said IOOF CEO Renato Mota on an investor call.
NAB CEO Ross McEwan, who took the helm last December, said the deal would let the bank "focus on executing our refreshed strategy of delivering simpler, more streamlined products and processes".
Australia's No. 3 lender put MLC on the market in 2018 then shelved the sale a year later as it sought to replace the bank's previous CEO in the wake of the industry inquiry.
The pricetag is lower than MLC's book value of A$1.86 billion, according to NAB, but bumps up the bank's surplus cash by A$220 million.
"The divestment of MLC ends a 20 year 'failed marriage'," said Credit Suisse (SIX:CSGN) analysts in a research note, adding it also meant NAB would likely to be able to continue to pay dividends at a time when it is pausing loan payments due to shutdowns caused by the new coronavirus.
Shares of IOOF were in a trading halt while it seeks to raise A$1.04 billion in cash from institutional and other investors to pay for the purchase. NAB shares were up 0.6% in morning trade, in line with the broader market.
The purchase price for MLC was 17.3 times cash earnings for the 2020 financial year - more than the 15.5 multiple for a similar earnings metric that KKR & Co Inc KKR.N is paying to acquire a 55% stake in Commonwealth Bank of Australia's CBA.AX pension business. = 1.3576 Australian dollars)