THE Singapore-backed Intersuisse Group has outlined plans to buy out the stockbroking arm of Austock Group.
The move marks the end of the ambitious securities house that once promoted itself as a mini-version of Macquarie Group.
Intersuisse, a rival mid-size stockbroker, has entered into an exclusivity agreement to acquire Austock's security and corporate advisory business.
Any transaction will depend largely on the outcome of due diligence, to take place over the next month.
The Melbourne-headquartered Austock has held on-and-off talks with the privately owned Phillip Brokerage over recent months on a possible deal as conditions in local markets became tougher for all stockbroking firms. For Intersuisse, which specialises in resource and energy stocks, the acquisition will give it broader distribution for its Singapore-based backer, Phillip.
"This will give us substantially increased scale, which allows us to leverage Phillip's franchise in Australia," said Intersuisse deputy chairman Jonathan Buckley.
Austock has repositioned itself over the past 18 months as a mid to small-cap broking firm, as it tries to profit from niches ignored by larger players. It has been buffeted by the financial crisis, with two of its key clients, ABC Learning and Timbercorp, having collapsed.
The broker last year hired the former head of Bank of America-Merrill Lynch in Australia, Paul Masi, as its chief executive, and has since made several other hirings from banks such as Macquarie, Merrill Lynch and UBS. Austock posted a net profit of $4.5 million for 2010-11, swinging from a loss in the previous period. No dividend was paid.
Continued low trading volumes on the Australian Securities Exchange and a dearth of corporate equity capital markets activity have combined to cut revenue for the entire broking industry.
Austock confirmed as much yesterday when it released a financial update warning that brokerage income remained depressed, while several capital market deals had been dropped or delayed until next year.
The transaction would result in Austock remaining a listed company focused on its profitable property trust and small life insurance bond business.
But the slimmed-down business is widely expected to emerge as a takeover target.