Bell, Southern Cross in $150m merger

Bell Financial Group Ltd has agreed to buy Southern Cross Equities for an expected $150 million in cash and scrip to create Australia's largest independent broker.

The purchase price is subject to Southern Cross achieving performance benchmarks, which Bell said would ensure the acquisition was earnings accretive.

The total consideration is 50 per cent cash, financed from cash in hand and future cash flows, and 50 per cent Bell shares, payable in four instalments over three years.

The equity portion will be issued at $1.25 a share.

Bell said it would continue to maintain cash reserves and remain debt free after the completion of the transaction.

The combined businesses would generate total revenue of almost $300 million on a proforma normalised basis, with an implied earnings per share (EPS) accretion of 33 per cent, Bell said.

Implied proforma EPS of the merged entity would be 16 cents, assuming no synergies, and the dividend 10 cents per share.

"The acquisition will provide our businesses with immediate access to a significantly expended product range and research base," Bell executive chairman Colin Bell said.

The merger will add 30 private client advisers to Bell's existing team of 290.

Bell announced this morning that its net profit for the six months to June 30, 2008, fell 46 per cent to $9.0 million on lower corporate fee income and a reduction in brokerage revenue.

Mr Bell said Southern Cross recorded an unaudited fiscal 2008 net profit of $25 million.

Mr Bell and Southern Cross executive chairman Brent Potts said the merged entity planned to hire additional staff, despite the downturn in global equities markets.

Mr Potts said the merger would accelerate Souther Cross's plans to expand overseas.

The transaction is subject to the approval of Bell shareholders and is expected to be completed by mid-September.

Bell undertook due diligence on Tricom this year, but decided not to proceed with a purchase of the troubled broker.

Danish online investment bank Saxo Bank later took a 35 per cent stake in Tricom with an option to move to full ownership in two or three years.

At 1232 AEST, Bell shares were up 12.5 cents, or 13.51 per cent, at $1.05.