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CBA swallows Count in $373m deal

THE Commonwealth Bank has taken advantage of a looming shake-up of financial planning rules by pushing ahead with the $373 million acquisition of Count Financial, giving the bank one of the biggest networks of financial planners.

THE Commonwealth Bank has taken advantage of a looming shake-up of financial planning rules by pushing ahead with the $373 million acquisition of Count Financial, giving the bank one of the biggest networks of financial planners.

The offer has been endorsed by Count's board. This week the Gillard government detailed the first round of reforms under its Future of Financial Advice package.

These changes, which seek to scrap commission-based payments and boost regulation, are already driving consolidation among smaller planners seeking to bulk up.

The Count founder and executive chairman, Barry Lambert, and his wife, Joy, will emerge with a $127.5 million windfall from selling their stake in the stock exchange-listed business to the bank.

The acquisition is likely to be a test for the new Australian Competition and Consumer Commission boss, Rod Sims.

It is the first major deal by a bank since the competition watchdog blocked National Australia Bank's $13.3 billion plan to buy the wealth manager Axa Asia Pacific. The Count Financial transaction, if it proceeds, is expected to increase the Commonwealth Bank's adviser numbers to more than 1850 from 1220. This would rank it second behind AMP in the number of advisers nationally. AMP has 4000 aligned planners since its takeover of Axa Asia Pacific last year.

The transaction will also deliver to the bank Count's near 18 per cent stake in the nation's biggest finance broking network, Mortgage Choice. In addition, Count has an approximate 8 per cent stake in another advisory firm, DKN Holdings.

"The FoFA reforms have ended the level playing field for mid-sized firms and non-aligned advisory networks like Count," Mr Lambert said.

"Industry consolidation has commenced and the reforms favour large, vertically integrated businesses, like fund managers, banks and platform owners."

The reforms, which are still being debated in Canberra, have led to uncertainty over how the financial planning landscape is likely to emerge.

There have been a swathe of mergers among smaller listed financial planning groups in recent months. IOOF and Snowball Group have launched separate deals.

For Mr Lambert, the acquisition represents something of a return to CBA - the accountant left the bank three decades ago to start Count as a specialist advisory firm.

After the deal Mr Lambert will remain as non-executive chairman of the firm, which will continue to operate as a stand-alone business within the Commonwealth Bank.

The bank's wealth management group executive, Grahame Petersen, said the acquisition represented a chance to invest in a well-run business which provided financial advice to wealthy clients.

Count ranks as Australia's largest franchise network of independent financial planners. The firm's focus has been to train accountants to sell financial products, giving it more than $14 billion of client funds and loans under advice.

Under the deal Commonwealth will pay $1.40 in cash for each Count share, representing a 64 per cent premium for Count's average trading price over the past three months.

The takeover will be by the way of a scheme of arrangement. Count shares yesterday shot up 36? to close at $1.42.

At $373 million, the offer represents a valuation multiple of 14.6 times Count's most recent annual net profit of $25.6 million.

Mr Lambert and the other board members have unanimously recommended that Count shareholders vote in favour of the Commonwealth Bank's offer, in the absence of a superior proposal emerging.

The recommendation is subject to an independent expert report concluding that the offer is in the best interests of Count shareholders.

Commonwealth Bank is being advised by Goldman Sachs while Count is being advised by JP Morgan.


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