The deal between multibillion-dollar company Challenger Group [ASX:CGF] and fund-managing service group Elanor Investors Group [ASX:ENN] has undergone some changes.
Ultimately, the latter is still to acquire Challenger’s $3.4 billion Australian and NZ real estate funds management business (CRE), albeit for a different price.
ENN was moving up by 2% in share value — less of a reaction to when the idea was first floated — and shares leapt more than 17% at the time.
As for CGF, shares remained flat. The ENN share price was trading for $1.72 at the time of writing while CGF’s shares will still set you back a substantial sum of $6.18 each:
Source: TradingView
Elanor forks out $37.7 million for Challenger’s real estate portfolio
First thing on Friday morning, Elanor Investors posted an update on the transaction details of its acquisition of CRE, with a transaction AUM still confirmed at $3.4 billion.
The purchase price for the allotment of properties has taken a reduction from the original proposed price of $41.8 million, now to the discounted price of $37.7 million.
The lowering of the price was said to have been based on the termination of a third-party advisory contract. This also means that Challenger’s interest in Elanor will also change to 13.7% once the transfer of securities is put to ADIC — which will hold a 3.0% interest in Elanor by the end of the transaction process.
This reflects Challenger’s proposed agreement to transfer 4.5 million of the 24.8 million Elanor securities to be issued to Challenger and to ADIC.
Elanor will issue 24.8 million securities as consideration for the 100% acquisition of CRE, representing up to 16.7% of ENN securities that are currently on issue.
The consideration is subject to claw-back from Challenger (of up to 63% over three years) based on certain milestones, including minimum base funds management fee targets.
Elanor says that this acquisition delivers a step-change in size and scale for its company as a whole — increasing AUM from $3.0 billion to $6.4 billion — with a new strategic partnership with Challenger, putting Elanor in a better position for further, stronger growth.
Other reasons listed by Elanor as the rationale behind the decision to acquire CRE, is to gather more solid material FY24 earnings accretion, particularly with CRE having acquired — on a three times one EBITDA multiple (after revised considerations and improved synergies) — an incremental EBITDA of $12 million.
Elanor will also benefit from stronger recurring funds management income, with management fees as income increased by around 57%.
Pro-forma base management fees, post-transaction, represent approximately 74% of total funds management income, and AUM will grow to $6.4 billion.
Tik-Stocks and the mania of 2024
Did you know that previous no-name and inconspicuous unassuming small-cap Stem Cell United [ASX:SCU] catapulted by 8,284% in two days on a medicinal cannabis venture?
It wasn’t so insignificant then, and it happened so suddenly.
Also, Cann Group [ASX:CAN] jumped by 30 cents to $4 in a manner of months on another viral explosion.
If you know where the next burst of mania is going to be, you can really take advantage of the hype.
This is why our experts bring you Tik-Stocks, a cousin to ‘meme stocks’ — you know, those stocks that go through the roof based on social media coverage.
These stocks can become overvalued in the blink of an eye. This means you need to time them right.
Intrigued? Click here for more.
Regards,
Mahlia Stewart
For Money Morning
