Markets: IOOF has form to go the distance

IOOF CEO Christopher Kelaher wants a 'cradle to grave' financial services company. He won't let Trust Co. go to Perpetual without a fight.

The longer the battle for Trust Co. continues the better its shareholders and board must feel.

Perpetual’s $247 million offer, based on Friday’s closing share prices, is 11 per cent above IOOF’s competing bid and 24 per cent higher than what Perpetual originally agreed to pay for the manager, adviser or supervisor of $164 billion of assets.

IOOF managing director Christopher Kelaher may respond by offering even more money for the Trust Co. He has never been one to shy away from a takeover battle he sees as adding to the fundamental value of his company.

Kelaher sees trustee services as providing a steady income stream to IOOF that will balance out more volatile IOOF businesses such as stock broking and fund management. Superannuation assets are growing all the time under the compulsory contribution scheme. Trustee superannuation services are also likely to grow together with demand for such services from native title, compensation and disability trusts.

A study by the Trust Co. last year showed increasing numbers of foreign fund managers, including overseas pension funds, are attracted to Australia’s bond and stock markets. That may mean more work for Trust Co. which wants to expand internationally.

Kelaher himself is comfortable managing merger integration. He himself assumed his current role in April 2009 after the merger of IOOF and Australian Wealth Management. He was one of the driving forces in the acquisition of stockbroker Ord Minnett and the merger between Australian Wealth Management and Select Managed Funds before it, creating a financial advice, platform administration and investment management business.

IOOF now has 13 brands, offering financial advice, platform management and administration, investment management as well as trustee services. Kelaher wants a “cradle to grave” wealth management company. He views the $32.6 billion IOOF’s Australian Executor Trustees currently manages as too small and too weak in the biggest Australian state by population, New South Wales, where Trust Co. has an especially strong relationship with companies.

Kelaher’s banker, Nomura’s Ian Maxton and lawyers at Corrs Chambers Westgarth, will be busy over the next few days. His counterparts at Goldman Sachs and Herbert Smith Freehills, which is advising Perpetual, may know the battle is not over.