Perth-based financial advisory group Western Pacific Financial Group has merged with listed Sydney company Snowball Group in a $50 million deal.
Perth-based financial advisory group Western Pacific Financial Group has merged with listed Sydney company Snowball Group in a $50 million deal.
The combined group will be one of Australia’s five biggest independently owned financial advisory practices, with 80 advisers across all mainland states and about $4 billion in funds under advice.
The merger of the two groups follows Western Pacific’s acquisition of a 20 per cent shareholding in Snowball last year.
Western Pacific managing director Geoff Pritchard said he has known the key people in Snowball for several years and was very comfortable with the two groups coming together.
The merger will be effected by Snowball acquiring Western Pacific Financial Group.
It will issue 80 million shares at a deemed price of 60 cents per share and make a cash payment of $2.1 million, valuing the target at $50.1 million. As a result of the share issue, Western Pacific Group Holdings will become the major shareholder in Snowball with a 61 per cent stake.
The transaction does not include Western Pacific Group Holdings’ two other business units: its asset management business, which has $300 million in funds under management; and its investment arm, which owns about 20 per cent of two boutique fund managers, Select Asset Management and MMC Asset Management.
Western Pacific Financial Group was formed in 1985 from the merger of five financial planning firms across Australia, including two in Perth.
The principals of the two Perth firms, Kieran Ryan and Dean Farmer, continue as directors of the group.
Mr Pritchard said the merger with Snowball would give the group national coverage, since Western Pacific was strongest in the outlying states, particularly WA and Queensland, while Snowball operated in Sydney and Melbourne.
He added that the merged group would continue to operate with two brands and would maintain the different business models currently employed.
Western Pacific encompasses 19 owner-operated advisory practices with 55 advisers and $2.1 billion under advice.
The practices pay a comparatively high proportion of their revenue to Western Pacific Financial Group, which in return delivers a range of dealer group services, value added services and equity participation in the group.
Mr Pritchard said another distinctive feature of Western Pacific’s business model was its focus on absolute return investing.
This means fund managers target positive long-term investment returns, irrespective of fluctuations in market indices such as the All Ordinaries index.
This strategy also involves use of non-mainstream boutique fund managers, including Western Pacific Asset Management
In contrast, Snowball has 25 salaried advisers with just under $2 billion in funds under advice.
A big part of the Snowball business provides services to affinity groups like credit unions and industry superannuation funds.
Mr Pritchard, who will become director marketing, sales and distribution of the merged group, said there were limited areas of overlap and therefore limited cost synergies.
The merged group’s main focus will be achieving faster growth through its wider series of distribution channels and products.
Snowball said the merged group would deliver a pro-forma net profit for the year to June 2007 of between $5.6 million and $6 million, before allowing for any synergies or integration and transaction costs.
The merged group will be run by current Snowball chief executive Tony McDonald, who said Snowball’s particular expertise was in workplace and community based advice, backed by its “tried and true” back-office systems.
