A mega deal is to be struck between multibillion-dollar company Challenger Financial [ASX:CGF] and fund-managing business Elanor Investors Group [ASX:ENN] via an offer of $41.8 million for Challenger’s $3.4 billion Australian real estate portfolio.
Elanor intends to issue 27.4 million securities to Challenger, representing up to 18.2% of ENN securities on issue, and a strategic partnership is also to be formed whereby Elanor will control Challengers’ real estate funds in Australia and New Zealand.
Shares for ENN rose more than 2% hours after the announcement to $1.48 per share.
CGF shares went slightly down by half a percentage point, still worth a sturdy $6.29 each.
Both of the financial management groups’ stocks are down in the year, ENN by 31% and CGF by 10%:
CGF and ENN strike up costly deal
Two financial management and assessment groups today forged a deal that will offer one of the companies control over the other’s assets for a large sum of money — forming a new strategic partnership in doing so.
Elanor Investors Group and Challenger have entered into agreements for Elanor to acquire 100% of Challenger’s $3.4 billion Australian real estate funds management business (CRE).
The asset purchase price has come out at a maximum consideration of $41.8 million, which Elanor intends to fund through issuing 27.4 million securities to Challenger, representing up to 18.2% of ENN’s total securities.
Both parties believe the deal will enable a broader strategic bond between Elanor and Challenger, as Elanor will become Challengers’ real estate funds management partner in Australia and New Zealand, with Challenger’s affiliate, Fidante, in charge of distributing the managed funds.
The acquisition delivers a step-change in size and scale for Elanor, increasing assets under management from $3–6.4 billion, and the group also believes it will put it in prime position for strong growth.
Shareholders seemed in quiet agreement, voting the ENN share price up 2% today — however, CGF investors seemed a little less enthused at the shedding of lucrative assets.
Nevertheless, ENN was excited about material FY24 earnings accretion and attractive EBITDA multiples from CRE. The group expects recurring funds income to increase by 60% and pro-forma base management fees to represent around 75% of funds.
Challenger said the transaction will combine Fidante’s distribution capability and Elanor’s real estate platform to create ‘a very compelling proposition for retail, high-net-worth and institutional customers.’
Glenn Willis, Elanor’s CEO, commented:
‘This is a transformational transaction for Elanor. Combining Elanor’s real estate funds management capability with Challenger’s market leading capital raising platform delivers significant size and scale benefits, and positions us for further strong growth.’
Challenger’s CEO, Nick Hamilton added:
‘The combination of Challenger’s real estate platform with Elanor will provide a significant uplift in capability and scale. Elanor’s track record in originating high quality real estate opportunities, combined with Fidante’s award-winning distribution capability, will allow us to meet more customer needs. Challenger will benefit from both alignment and access to growth via the acquisition of a strategic stake in Elanor, and we are excited to continue to grow the real estate platform together with the Elanor team.’
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