Euroz has snapped up rival Perth broker Blackswan Equities, bolstering its exposure to wealth management as smaller brokers consolidate amid tough conditions.
Late on Wednesday night, Euroz told the stock exchange it would buy Blackswan for up to 5.2 million shares, subject to due diligence between the parties.
Before the deal, Euroz was trading at $1.295, valuing the deal at $6.6 million. Euroz closed up 2.7 per cent to $1.33.
Euroz, which also conducts institutional trading, said Blackswan would nearly double the size of its private client dealing desk and form a “significantly stronger distribution platform”.
Euroz also conducts corporate deals such as takeovers and capital railings, and funds management.
“Blackswan have an excellent reputation as a strong private client and portfolio administration business, and their expertise in this area will enhance our wealth management capabilities,” said Euroz co-founder and chairman Andrew McKenzie. “(It) will provide solid revenue, cost and operational synergies for our combined group.”
The deal signals that smaller brokers are likely to continue to merge amid lower trading levels since 2009 and higher costs, leading some firms into the red.
Rival Perth brokers CPS Securities and Indian Ocean Capital joined up last year. This followed a spate of tie-ups on the east coast in recent years, including EL & C Baillieu acquiring FW Holst, Wilson HTM taking over Investorfirst and BBY buying Cameron Stockbrokers and StoneBridge.
Blackswan chairman Tim Lyons said Euroz would provide opportunities with its “significant” networks of high net worth clients.
Blackswan has funds under advice in excess of $1.4 billion.
“We are very confident in our ability to integrate the two firms and cultures into a combined powerhouse in the West Australian market,” Lyons said.