The Commonwealth Bank is bailing out of its funds management arm via a stockmarket float of the company with its $219 billion in assets acquired 18 years ago by then CEO, David Murray in a move that set up the current structure of the troubled Australian banking sector.
The CBA said late yesterday in a statement that it will look to sell its global investment business, Colonial First State Global Asset Management (CFSGAM), through a float of the business following a strategic review over the past seven months.
The CBA has owned Colonial since May 2000 when it paid $10 billion for it and the old Colonial Bank (which included the former State Bank of NSW). The First State and CBA asset management operations were combined into one group in early 2002 with $106 billion of assets.
The float is expected to be priced at around $4 billion and will follow the CBA’s sale of is Comminsure insurance operations (a very troubled business) for more than $3.8 billion late last year.
The statement was made after the market closed yesterday. CBA shares rose 0.2% to $72.76 which left them down nearly 15% in the past year. It is possible the funds management giant could be bought by a big offshore operator given that it controls around 6% of the country’s $3 trillion plus funds management sector.
Westpac has sold down its interest in BT Financial Group last year. While the NAB sold 80% of its MLC life business to a huge Japanese insurer, NAB has kept ownership of 20% of the new life insurance business, and retain full ownership of the existing investments business which includes superannuation, platforms, advice and asset management. The ANZ has been selling off its various funds management, insurance and wealth management businesses as well.
CFSGAM, known as First State Investments outside of Australia, is a global investment management business with established offices across Europe, the US and Asia Pacific regions.
At December 2017, CFSGAM managed $219 billion of assets on behalf of institutional investors, pension funds, wholesale distributors, investment platforms, financial advisers and their clients worldwide.
“While CFSGAM has achieved significant growth, scale and diversification under the current ownership structure, the strategic review determined that an independent ownership model would provide greater benefits,” the CBA said in a statement.
The CBA said it now intends to pursue an initial public offering of CFSGAM on the ASX by the end of calendar year 2018, subject to market conditions and necessary approvals.
"In preparation for the potential listing, Commonwealth Bank and CFSGAM have approached several candidates who have agreed to join the board of CFSGAM as independent non-executive directors pursuant to the potential IPO.
The candidate directors include John Mulcahy (who would be appointed as Chairman), Susan Doyle, James Millar, Gail Pemberton and Richard Wastcoat. Additional directors may be approached to join the board ahead of the potential IPO. Mark Lazberger will continue in his role as Chief Executive Officer of CFSGAM and would be appointed as an executive director of the board.”
Mr Mulcahy is a former CBA executive, holding the position of Group Executive, Investment and Insurance Services before leaving in 2003 to become CEO of Suncorp Metway until 2009.
