IOOF (IFL) and Shadforth Financial Group Australia (SFGA) are to merge in a deal valued at $670 million.
Under the scheme of arrangement, SFGA shareholders will be offered 0.104 of an IOOF share for each SFGA share they hold.
The suitor will also make available a cash alternative, subject to a maximum cash component of $100 million in aggregate.
SFGA's board has unanimously recommended that SFGA shareholders vote in favour of the merger.
IOOF said proposed transaction represents an implied 24.6% premium to SFGA's 90 day volume weighted average price (VWAP).
IOOF said the offer represents an implied valuation multiple of 18.5 times SFGA's underlying net profit after tax for the 12 months ended December 2013 and an implied value per SFGA share of: 90c based on IOOF’s 90 day VWAP to 15 May 2014.
Subject to a an independent expert concluding that the offer is in the best interests of SFGA shareholders and in the absence of any superior proposal, the SFGA board said it intends to instruct any SFGA shares in which they have a relevant interest to support the deal.
The suitor said it expects the proposed transaction will be 8.3% earnings per share accretive in fiscal 2016, including synergies for IOOF on an underlying cash NPAT basis.
It expects the deal will generate pre-tax synergies of approximately $20 million per annum by fiscal 2016.
IOOF managing director Christopher Kelaher said the deal was a continuation of the group's ongoing, long-term strategy of pursuing value-accretive acquisitions.
"The addition of SFGA will increase IOOF’s financial advice and distribution segment considerably," he said.
"This segment currently accounts for 14% of our revenue which will rise to an expected 30% of revenue after the transaction.
"The combination of the two businesses will strengthen IOOF’s capabilities and will enhance our high net worth proposition."
IOOF has almost $124 billion in funds under management and supervision, and offers financial and investment advice and trustee services.
SFG Australia provides a range of wealth management services, and has $13.7 billion in funds under advice.
If court and shareholder approval is granted, the takeover is expected to be sealed by late August.