26/02/2009 - 09:30

Plan B Group acquires Melbourne firm

26/02/2009 - 09:30

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Wealth management company Plan B Group Holdings has paid some $7 million in cash and scrip to acquire a majority interest in Melbourne-based wealth advisory business, Strategic Financial Management.

Plan B Group acquires Melbourne firm

Wealth management company Plan B Group Holdings has paid some $7 million in cash and scrip to acquire a majority interest in Melbourne-based wealth advisory business, Strategic Financial Management.

In an announcement late yesterday, Plan B said it has acquired a 62 per cent interest in Strategic, which has some $354 million of funds under advice and an average client portfolio value of $2.4 million.

Under the deal, Plan B will initially invest 3.98 million new ordinary shares, escrowed for 12 months, and has made cash payment of $5.2 million from existing cash reserves.

Option arrangements are also in place over the remaining 38 per cent of Strategic.

Yesterday, Plan B's share price closed at 46 cents and in early trade today, shares jumped 20 per cent to 55c at 11:34 AEDT.

"In spite of the challenging market conditions facing the economy and particularly the financial services industry, we remain committed to pursuing our expansion strategy by seeking to acquire interests in exceptional wealth advisory businesses," Plan B managing director Denys Pearce said.

Plan B said Strategic is anticipated to make a small net profit contribution in this financial year, but the business is expected to be earnings per share accretive on a full year basis.

Last week, Plan B announced a net profit for the half year of $1.29 million, down from $2.7 million from the prior corresponding period.

The company had $12.3 million in cash holdings at the end of the reporting period.

 

 

The announcement is below:

 

 

Plan B Group Holdings Limited ("Plan B" or the "Company") is pleased to announce that it has acquired a 62% interest in Strategic Financial Management ("Strategic"), an established wealth advisory business based in Melbourne. Founded in 1995, Strategic has approximately $354 million of funds under advice with an average client portfolio value of $2.4 million.

Mr. Denys Pearce, Managing Director of Plan B commented, "In spite of the challenging market conditions facing the economy and particularly the financial services industry, we remain committed to pursuing our expansion strategy by seeking to acquire interests in exceptional wealth advisory businesses.

"Strategic is a high quality wealth advisory firm with a strong focus on understanding and addressing clients' needs and providing the highest levels of service. Its operations are highly complementary to Plan B and we believe the business and its principals meet the highest standards of our strict acquisition criteria."

The consideration for the acquisition of this initial investment will be the issue of 3,984,714 new ordinary shares (voluntarily escrowed for 12 months) and the payment in cash of $5.2 million from Plan B's existing cash reserves. Option arrangements are in place concerning the remaining 38% of Strategic not owned by Plan B. The exercise
dates of the options are staggered over the period to 30 September 2011, with the potential cash and scrip consideration payable by Plan B based upon multiples of the future earnings of the business.

For the balance of the current financial year, Plan B management will be implementing group systems and integrating Strategic into the Plan B business model. Accordingly, it is anticipated that Strategic will make only a small net profit contribution in the current financial year. However, the business is anticipated to be earnings per share accretive on a full year basis. In addition, the integration process is expected to generate considerable operational efficiencies and earnings synergies in the future.

"We look forward to working with the staff of Strategic to enhance the continued growth of the business and improve the client experience even further," Mr. Pearce said.

 

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