CC Capital ups the ante in Insignia bidding war

In an ASX announcement on Friday morning, Insignia Financial has revealed that CC Capital has delivered a revised indicative non-binding proposal to acquire 100 per cent of the financial services firm by way of a scheme of arrangement.

The new offer came in at $4.60 per share, which is 7 per cent higher than its previous offer and that of Bain Capital at $4.30 per share.

“The CC Capital Revised Indicative Proposal is otherwise subject to the same terms and the same conditions as the Initial CC Capital Proposal,” Insignia said.

“The Board of Insignia Financial, together with its financial and legal advisers, is considering the CC Capital Revised Indicative Proposal. There is no certainty that the CC Capital Revised Indicative Proposal will result in a binding offer or that any transaction will eventuate.

“IFL shareholders do not need to take any action at this time. Insignia Financial will continue to keep the market informed in accordance with its continuous disclosure obligations.”

The offer is the second Insignia has received this week. In a release to the ASX on Monday morning, Insignia announced that it received a revised non-binding and indicative proposal from Bain Capital to acquire all of the shares in Insignia Financial by way of a scheme of arrangement at a price of $4.30 cash per share.

Bain first attempted to acquire Insignia Financial in December with an offer of $4 per share, however, the board decided this figure was not sufficient.

“The Insignia Financial Board believes that, based on its view of the fundamental value of Insignia Financial, the proposed transaction does not adequately represent fair value for IFL shareholders in the context of a change of control transaction and that it is not in the best interests of IFL shareholders to engage with Bain Capital in relation to the indicative proposal,” Insignia said at the time.

Last week, Insignia announced to the ASX that Brookfield had not made an offer on the firm, despite reports that it was actively weighing a bid.

According to The Australian, the global alternative asset manager with over US$900 billion in assets under management is considering a bid for the wealth firm, however, it added that Brookfield has yet to decide whether to make an indicative offer.

According to Morningstar equity analyst Shaun Ler, the bidding war “vindicates” the firm’s view that Insignia was undervalued, noting that Morningstar believes its “earnings outlook is brighter versus its 2023–24 levels”.

“The firm is recovering from past headwinds that hurt its ability to attract and retain client assets and improve profitability,” Ler said.

“These include the royal commission in 2018 and sharp rate rises of 2022–23. Margin expansion prospects are improving, driven by restructuring initiatives such as migrating client funds to more efficient platforms, reducing non-essential costs and an expected recovery in fund flows from cyclical lows.”

According to Morningstar, the new “fair value estimate” for Insignia is $3.95 per share, up from its previous number of $3.60, which Ler said reflected an “equal-weighted probability of Insignia being acquired by CC Capital or staying stand-alone”.

Both are considerably higher than what the firm was trading at prior to the takeover attempts started, with Insignia shares having climbed 35 per cent from $3.06 at the start of December to its current price of $4.10. It is also up around 15 per cent from $3.54 prior to CC Capital’s bid.