Westpac has sold out of its residual 9.5 per cent stake in Pendal for $185.3 million, with the bank’s ongoing wealth review to potentially affect its remaining $15.4 billion in funds under management with the investment group.
Westpac completed its institutional offer on Thursday morning, which saw it sell 31 million shares in the group at $5.98 each, representing a discount of 4 per cent to the closing Pendal share price on Wednesday.
Westpac acting chief financial officer Gary Thursby said the move is in line with the bank’s strategy to simplify its operations.
“Pendal is a highly regarded, independent business, and given Westpac’s commitment to simplify its operations and focus on banking in Australia and New Zealand, now is the right time to complete our divestment,” Mr Thursby said.
Previously, the major bank indicated it would divest its remaining stake during its previous sell-down of Pendal shares in 2017, after it sold down its shares in 2007 and 2015.
But Westpac has had an ongoing business relationship with the group, with Pendal managing some assets within the bank’s superannuation business.
Following a program of consolidating super products, approximately $1.5 billion in funds under management (FUM) was withdrawn from Pendal in April last year and a further approximate $1 billion was withdrawn in February.
Westpac stated a further withdrawal is expected to occur in two tranches, with the first tranche of around $1 billion to occur later in 2020 and the second, with an amount yet to be confirmed of up to $80 million, to occur next year.
The bank has also undertaken a strategic review of its wealth businesses, including super, platforms and investments – which may result in a partial or full loss of the funds that Pendal manages on behalf of Westpac. No indication has been given yet of the impact on Pendal.
Pendal chief executive Emilio Gonzalez said the firm acknowledges the “significant part Westpac has played in Pendal’s history”, both as an owner and client, but the two companies will remain intertwined.
“We continue to have a strong client relationship with Westpac and currently manage $15.4 billion in FUM on their behalf which constitutes 18 per cent of our total FUM and less than 10 per cent of total revenue,” Mr Gonzalez said.
“Additionally we continue to transition a number of support services from Westpac, including the Australian back-office operations which is expected to take place over the coming two years.”
He added the group has noted the strategic review of Westpac’s wealth businesses.
“As an active fund manager we continue to focus on delivering long-term returns and true to label best outcomes for Westpac, as we continue to do for all of our clients,” Mr Gonzalez said.
Pendal chair James Evans said it was the end of a chapter for the group, its “operational resilience and robust business model” will keep it in good stead for the future.
“While this marks the end of an era of ownership in Pendal by Westpac, Pendal has continued to build on the strong foundations of the business since it was first floated as BT Investment Management on the ASX in 2007,” Mr Evans said.
“At the time of IPO, it had $41.9 billion funds under management, all from Australian domiciled clients and the majority of it managed on behalf of Westpac.
“Since that time Pendal has transformed and diversified the business across geographies, clients, currencies and asset classes, and we have more than doubled in size and scale to become a truly global company with approximately $86 billion FUM and 70 per cent of revenue offshore.”
Settlement of the Westpac institutional offer is due to occur on 22 June.
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