Insignia opens its books to CC Capital

In an ASX announcement on Monday morning, Insignia Financial said it has offered New York-based firm CC Capital a glimpse into its operations.

On Friday, CC Capital 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 last week.

“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.

On Monday, Insignia said its board has “carefully considered” the revised proposal and, in order to determine if CC Capital is “able to formulate a further improved proposal”, it has “offered to provide to CC Capital a limited period of access to certain non-public information on a non-exclusive basis”.

“The provision of this information is subject to certain conditions, including the signing of an appropriate confidentiality and standstill agreement by CC Capital,” Insignia said.

“The provision of limited due diligence does not guarantee that the CC Capital Revised Indicative Proposal will result in a binding offer or one that is capable of being recommended by the Board of Insignia Financial.

“IFL shareholders do not need to take any action. Insignia Financial will continue to keep the market informed in accordance with its continuous disclosure obligations but it will not otherwise be commenting on the process that is now underway with CC Capital.”

The firm is due to release its 2Q25 business update this week ahead of its first half results announcement on 20 February 2025.

The move follows CC Capital upping its bid after Insignia informed the ASX that it had 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.

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 when 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.

Speaking on The ifa Show, Forte Asset Solutions founder and director Steve Prendeville said the interest is due, in part, to Insignia being the “last real institution” left in the Australian advice environment following the exit of AMP last year.

“That in itself is attractive purely because of its size,” he said.

“It also is one of the larger assets around … and we don’t have many, to be fair. So, this is the last one standing.”