20/07/2020 - 11:36

Euroz, Hartleys finalise merger plan

20/07/2020 - 11:36

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Euroz is planning to partially retain the Hartleys brand and intends to bring independent directors onto its board as part of its agreement to acquire the rival stockbroking firm.

Euroz, Hartleys finalise merger plan
Euroz chairman Andrew McKenzie (left) and Hartleys chairman Ian Parker.

Euroz is planning to partially retain the Hartleys brand and intends to bring independent directors onto its board as part of its agreement to acquire the rival stockbroking firm.

The bid implementation agreement signed today specifies that the Hartleys business will be merged with the Euroz Securities business, with the combined group to trade as Euroz Hartleys.

The agreement also has further details of a major board restructure.

Four of the existing board members of Euroz will resign upon completion of the acquisition, expected in September.

The three remaining Euroz board members will be joined by Hartleys chairman Ian Parker and director Richard Simpson.

In addition, Euroz said today it was looking for suitable candidates to join its board as independent directors.

That marks a notable shift, as the Euroz board has to date been exclusively comprised of executive directors.

Apart from the branding and board changes, the terms of the acquisition are essentially the same as announced by the two companies on 19 June.

Euroz will issue 33 million shares for 100 per cent of Hartleys.

Hartleys’ 57 shareholders, all of whom work for the broking firm, will end up owning 17 per cent of the combined group.

The takeover deal is valued at just above $35.3 million based on Euroz’s closing price of $1.07 per share.

That is down 8 cents from its close on Friday after the stock went ex-dividend for 6 cents per share, fully franked.

The merger will combine Hartleys’ 44 client advisers with 37 at Euroz Securities.

That would put the combined group ahead of rival Canaccord Genuity, which has 55 client advisers, according to Business News’ Data & Insights.

As well as its stockbroking arm, Euroz has substantial wealth management (Entrust) and funds management (Westoz) businesses.

Executive chairman Andrew McKenzie said the combined group would have a strong balance sheet, critical scale and strong operational synergies with solid recurring and transactional revenues.

Mr Parker said the merger provided an opportunity for Hartleys to build on its strong history.

Today’s announcement comes nine months after Canaccord Genuity substantially boosted its WA profile by completing its acquisition of Patersons Securities for $25 million.

Since then, Canaccord has moved ahead of its two major Perth-based rivals, judging by WA capital raising deals tracked by Business News Data & Insights.

Canaccord had a lead role on 42 WA-focused capital raisings worth $716 million in the six months to June 30, ahead of Euroz (15 deals) and Hartleys (13 deals).

The details of the Patersons acquisition were disclosed in the 2020 annual report of Canadian parent company Canaccord Genuity Group Inc, released last month.

The notes to the financial statements reveal the purchase price of $25 million – equivalent to $C22.6 million – consisted of 10 different components.

These included $C11.1 million for cash, $C8.3 million for ‘right of use’ assets, $C5.7 million for accounts receivable, $C4.4 million for securities owned and other tangible assets and $C5.1 million for deferred tax assets.

The purchase price also included $C6.5 million of identifiable intangible assets, such as customer relationships and the contract book, and $C2.7 million for goodwill, defined as the value of expected synergies arising from the acquisition.

These assets were offset by $C21.5 million of unspecified liabilities.

By comparison, Mr Parker has previously told Business News that about $20 million of cash will be taken out of the Hartleys business before it is sold.

Further details are expected to be in the bidders’ statement, due for release in mid-August.

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