Lonsec Holdings Pty Ltd., a leading financial advice and investment firm, has reportedly announced that it would be selling a 37% stake in the company to Generation Development Group (GDG), an ASX listed company specializing in providing development capital to financial businesses. GDG would pay $26 million in cash for this 37% stake in Lonsec Holdings.
GDG would be raising about $35 million from an institutional placement and from an accelerated non-renounceable entitlement offer. Of the raised $35 million, approximately $20.1 million would be invested towards the acquisition of the Lonsec stake, while over $10 million would be invested for creating a new annuity product($5 million for development cost, $5 million in regulatory capital), and the remainder of the amount would be reserved for transaction costs and general working capital.
The company would pay a total amount of $26.6 million to acquire the 37% Lonsec stake, the transaction would be divided into two parts, with $20.6 million in upfront cash and about $6.6 million as deferred scrip consideration that would be issued at an offer price of approximately 70 cents as well as contingent on the FY21 EBITDA performance of Lonsec.
The seal is expected to conclude by mid-October and would effectively expand the addressable market of GDG and also subsequently diversify its income streams, the firm stated.
GDG chairman Rob Coombe stated that Lonsec is a renowned and respected company as far as the financial services sector is concerned. The company’s clients include a substantial proportion of the top fund managers, wealth platforms, advisory groups, and superannuation platforms in Australia. GDG’s investment in Lonsec would offer the company a strong foothold in an attractive and developing niche of the wealth management and financial services industry.
Lonsec’s selling of its stake comes after Zenith selling a portion of the company to a private equity firm last year as well as Chant West, a superannuation and pension research company, selling its superannuation research division to Zenith.