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The board of brokerage group Selfwealth (ASX: SWF) intends to unanimously recommend a $51 million takeover offer put forward by Bell Financial (ASX: BFG) in a deal that would add 130,000 active portfolios to the suitor's roster, lifting its sponsored holdings by $11 billion.
The non-binding indicative proposal represents an 83 per cent premium to the last closing share price for Selfwealth, and a 26 per cent premium to an offer the board rejected last year from multinational competitor Stake.
Stake's proposal last year came within months of Selfwealth reporting a maiden profit for FY23 and its then-CEO Cath Whitaker's abrupt resignation, and the board's dismissal of the deal was followed by the appointment of a new CEO Craig Keary within a week.
Since then the Melbourne-headquartered company has managed to lift underlying earnings by more than a third despite lower trading volumes, in part due to reduced operational expenses and a pivot from the refreshed leadership team to form a more customer-centric business model.
With the business now showing improved profitability, even in the context of weaker macro-economic conditions in the past year, the Selfwealth board and management are now much more open to the idea of a buyout.
After fellow Melbourne-based broking and financial services group Bell approached the group in October, and the due diligence that followed, Selfwealth has determined its proposal is "highly attractive" for shareholders and has entered into an exclusivity deed for further discussions.
Selfwealth notes that if a deal goes ahead, shareholders will be able to choose between taking cash or Bell Financial shares, which have risen marginally by around 2 per cent this morning following the announcement.
"The board and management of Selfwealth view the Bell proposal as compelling for Selfwealth’s shareholders, team members and clients," says Selfwealth chair Christine Christian.
"It would deliver significant value to shareholders, with an attractive cash price and the potential to share in possible synergies for those electing to receive Bell shares.
"We also believe our clients will benefit from Bell’s diversified wealth management offering."
Bell Financial chair Brian Wilson says the integration of Selfwealth into his group's Technology & Platforms business will add significant scale, increasing its sponsored holdings to $94 billion.
"We are excited by the prospect of welcoming SelfWealth’s clients and team to Bell," he says.
"Clients of both businesses will benefit from a superior user experience through leveraging the respective strengths of both businesses, and access to the broader array of products and services available within BFG."
A potential agreement is still conditional on no material adverse changes to the Selfwealth business, all existing performance rights being cancelled on terms acceptable to Bell, and an official unanimous recommendation from the Selfwealth board that shareholders vote in favour.
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